PriceSmart(PSMT) - 2020 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenues for Q3 2020 were $799.9 million, an increase of 1.4% year-over-year, while net merchandise sales were $768.4 million, up 1.8% compared to the prior year [39][63] - Net income decreased by 9.9% to $12.7 million, or $0.41 per diluted share, compared to $14.1 million, or $0.46 per diluted share in the same period last year [55][71] - Total gross margin for net merchandise sales was 13.9%, consistent with the same quarter last year but down from recent quarters due to a drop in higher-margin areas impacted by the pandemic [65] Business Line Data and Key Metrics Changes - In Central America, net merchandise sales increased by 1.2%, but comparable net merchandise sales decreased by 6.4% due to traffic reductions from local government restrictions [41] - The Caribbean region saw total net merchandise sales grow by 9.6%, with comparable net merchandise sales growth of 6.4%, driven by strong performance in the Dominican Republic, Trinidad, and Jamaica [42] - In Colombia, net merchandise sales decreased by 14.5%, with comparable net merchandise sales down 14.8%, significantly impacted by currency fluctuations [44] Market Data and Key Metrics Changes - The company faced varying impacts across its 13 markets, with some experiencing temporary club closures and restrictions on operations due to COVID-19 [24][23] - Membership accounts decreased by 2.2% year-over-year, with a trailing 12-month renewal rate of 82.5%, down from 85% the previous year [47][48] - Membership income increased by 3% during the quarter, attributed to new club openings and the launch of platinum membership programs in various markets [51][52] Company Strategy and Development Direction - The company focused on cash management and liquidity during the pandemic, balancing the need for sufficient liquidity while pursuing growth opportunities [33][62] - The launch of the Click & Go program, enabling minimal contact shopping, has been a significant development, representing 2.7% of net merchandise sales in June [30][28] - The company plans to open its third warehouse club in Bogota, Colombia, in Q2 of fiscal 2021, indicating ongoing expansion efforts despite the pandemic [37][56] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by the pandemic but expressed confidence in the company's adaptability and ability to meet member needs [10][38] - The company is preparing for various scenarios regarding potential COVID-19 resurgences and associated restrictions, emphasizing the importance of flexibility [90][91] - Management believes that the pandemic has accelerated some plans and highlighted opportunities for growth and improvement in operations [61][62] Other Important Information - The company opened its 46th club in Liberia, Costa Rica, marking a significant milestone in its expansion strategy [35][56] - Cash provided by operating activities increased by $61.2 million compared to the previous year, reflecting adjustments to inventory levels in response to demand shifts [73] - The company has taken proactive measures to manage costs, including furloughing employees and negotiating extended terms with vendors [78][77] Q&A Session Summary Question: Inquiry about gross margins and merchandise mix - Management noted that gross margins decreased due to restrictions on services requiring physical contact, impacting higher-margin areas like bakery and optical [85] Question: Improvement in higher value-added services - Management confirmed that there have been incremental improvements in services like optical and bakery, but the situation remains dynamic [87] Question: Potential for additional restrictions due to COVID-19 resurgence - Management stated that they are preparing for various scenarios and believe that increased COVID-19 cases could lead to greater restrictions [90][91] Question: Comparison of Click & Go program with competitors - Management emphasized that they have launched and expedited the Click & Go program effectively, receiving positive feedback from members [92]