PriceSmart(US:PSMT)2025-01-08 21:04Operations and Expansion - As of November 30, 2024, PriceSmart operated 54 warehouse clubs across 12 countries, generating revenues exceeding $4.9 billion in fiscal year 2024[162]. - PriceSmart plans to open two new warehouse clubs in Costa Rica and Guatemala in 2025, increasing total clubs to 56[169]. - The company plans to open a new warehouse club in Cartago, Costa Rica, in spring 2025 and a seventh club in Quetzaltenango, Guatemala, in summer 2025[183]. Membership and Customer Engagement - The company has nearly 2 million membership accounts and almost 4 million cardholders, indicating strong customer engagement[162]. - The annual fee for a Diamond Membership is approximately $40, while Platinum Members pay $80 per year for a 2% cash-back rebate[163]. - Membership income for Q1 FY2025 rose by 13.8% to $20.2 million compared to the same period last year[186]. - The number of Platinum Membership accounts increased to 14.0% of the total membership base as of November 30, 2024, up from 9.3% a year earlier, indicating a successful promotional campaign[215]. - Membership income in the Caribbean segment increased by 17.7% to $5.5 million, reflecting the impact of a $5 increase in membership fees[213]. - The trailing twelve-month renewal rate for memberships was 87.8% as of November 30, 2024, slightly up from 87.4% a year earlier[216]. Financial Performance - Total revenues increased by 7.8% compared to the prior year, with net merchandise sales also rising by 7.8%[186]. - Comparable net merchandise sales increased by 5.7% for the 13 weeks ended December 1, 2024, with a constant currency increase of 6.1%[186]. - Net merchandise sales in Central America increased by 8.4%, contributing 5.1% to total net merchandise sales growth[192]. - Net merchandise sales in the Caribbean segment increased by 5.4%, contributing 1.5% to total net merchandise sales growth[193]. - For the three months ended November 30, 2024, consolidated net merchandise sales were $1,223.9 million, reflecting a 7.8% increase compared to the prior year, with a negative impact of $4.7 million (0.4%) from currency fluctuations[196]. - Net merchandise sales for the three months ended November 30, 2024, were $1,223,859, an increase of $88,845 compared to $1,135,014 in the prior year, representing a growth of 7.8% in total revenues[221]. Expenses and Margins - Selling, general and administrative expenses increased by 10.1% compared to Q1 FY2024, primarily due to investments in technology[186]. - Total gross margin for the same period was $193,982, with a gross margin percentage of 15.9%, down 0.2% from 16.1% in the prior year[221]. - Selling, general and administrative expenses increased by $14.8 million to $160,794, representing 12.8% of total revenues, up from 12.5% in the prior year[227]. Income and Earnings - Operating income for Q1 FY2025 was $58.3 million, remaining effectively flat compared to the prior year[186]. - Net income for Q1 FY2025 was $37.4 million, or $1.21 per diluted share, compared to $38.0 million, or $1.24 per diluted share, in Q1 FY2024[186]. - Adjusted EBITDA for the three months ended November 30, 2024, was $79,117, an increase of $1,347 compared to $77,770 in the prior year[221]. - Interest income decreased to $2,220, down $646 from $2,866 in the prior year, primarily due to lower interest rates[231]. - Interest expense for the three months ended November 30, 2024, was $2,695, a decrease of $121 compared to $2,816 in the prior year[234]. Cash Flow and Investments - Net cash provided by operating activities for the three months ended November 30, 2024, was $38.5 million, a decrease of $2.6 million compared to $41.1 million for the same period in 2023[246]. - Net cash used in investing activities decreased to $29.3 million for the three months ended November 30, 2024, from $30.1 million in the prior year, primarily due to a $16.9 million decrease in purchases of short-term investments[247]. - Net cash used in financing activities significantly decreased to $17.6 million for the three months ended November 30, 2024, from $74.5 million in the same period last year, reflecting fewer stock repurchases[248]. - Capital expenditures for the three months ended November 30, 2024, totaled $28.2 million, with $14.1 million allocated for maintenance and $14.1 million for growth expenditures[250]. Tax and Compliance - The provision for income taxes was $13,496, with an effective tax rate of 26.5%, down from 32.3% in the prior year[240]. - As of November 30, 2024, the company accumulated income tax receivables of $11.3 million and deferred tax assets of $3.7 million in a specific country due to minimum tax rules[265]. - The Company has not placed any allowance on the recoverability of remaining tax receivables or deferred tax assets, believing it is more likely than not to succeed in refund requests[266]. - The Company has not recorded any allowances against VAT and income tax receivables, indicating confidence in recovering disputed balances[267]. Currency and Market Risks - Approximately 80% of net merchandise sales in the first quarter of fiscal year 2025 were in currencies other than the U.S. dollar, with 50.2% of those sales in products purchased in U.S. dollars[173]. - In fiscal year 2023, the Colombian currency devalued by approximately 15%, impacting pricing strategies and total gross margin rates[174]. - The company is actively addressing U.S. dollar illiquidity issues in markets like Trinidad and Honduras, which affects currency conversion for operations[245]. - The Honduran Central Bank began limiting U.S. dollar availability, with approximately $10.9 million in cash and equivalents in lempiras that cannot be readily converted to U.S. dollars[181]. - Currency fluctuations had a $9.9 million (1.4%) positive impact on net merchandise sales in Central America, while the Caribbean and Colombia segments experienced negative impacts of $7.9 million (2.5%) and $6.8 million (5.4%) respectively[197][198][199]. Internal Controls and Governance - Management's evaluations of disclosure controls and procedures concluded they were effective at the reasonable assurance level[274]. - There have been no changes in internal control over financial reporting that materially affected the Company's controls during the most recently completed fiscal quarter[275]. - The Company continues to monitor market risks primarily related to interest rates and currency exchange rates, with no material changes reported[270]. Miscellaneous - The company declared an annual cash dividend of $1.16 per share, with a special dividend of $1.00 per share also declared during fiscal year 2024[249]. - The company repurchased approximately 1,007,000 shares of common stock under a program authorized in July 2023, completing the program in the first quarter of fiscal year 2024[257]. - No impairment charges were recorded during the first quarter of fiscal year 2025, despite evaluations of long-lived assets[268]. - Seasonal fluctuations in merchandising businesses affect operating results, making quarterly results not indicative of full fiscal year performance[269].