PriceSmart Misses Earnings, Beats Sales

Zacks

Retail warehouse stores operator, PriceSmart, Inc. (PSMT), recently reported third-quarter fiscal 2013 results along with net sales and comparable sales figures for the month of Jun 2013.

Quarter Details

PriceSmart reported adjusted earnings of 61 cents per share in the third quarter of fiscal 2013 (ended May 31, 2013), missing the Zacks Consensus Estimate of 64 cents by 4.7%. We believe that better-than-expected top-line performance was offset by lower gross margins, which resulted in the earnings miss.

Earnings grew 17.3% from the prior-year quarter earnings of 52 cents due to year-over-year growth in revenues and operating income.

The company reported total revenue of $571.7 million in the third quarter, up 13.1% from the prior-year quarter. Revenues were slightly higher than the Zacks Consensus Estimate of $570 million.

Net warehouse club sales increased 12.3% to $555.8 million in the quarter due to decent comps growth. Comparable warehouse sales growth (comps) for the 13 weeks, ending Jun 2, were 9.2% driven by strong comps in the Latin/Central American markets. The Latin American comps grew 16.4% in the quarter due to increased traffic following Easter season and the Semana Santa celebrations. Recent club openings also boosted growth in Latin America. Comps in the Caribbean region grew 6.4% in the third quarter, better than the first two quarters of the fiscal year.

Warehouse gross profit margin declined 55 basis points to 14.4% in the quarter due to lower merchandise pricing. Operating income grew 13.0% in the quarter to $28.7 million as the gross margin decline was offset by higher interest income and strong cost controls.

The company had cash and cash equivalents of $92.4 million as of May 31, 2013, compared with $101.2 million as of Feb 28, 2013.

Jun 2013 Results

Concurrent with third-quarter results, PriceSmart also announced net and comparable warehouse club sales for the month of June. Net warehouse club sales grew 14.2% to $186.9 million for the month.

Further, PriceSmart reported 9.7% year-over-year increase in comparable warehouse sales for 29 warehouse clubs for the four weeks ended Jun 30, 2013. PriceSmart’s comps have grown more than 9% since April, after witnessing slow comp growth in the first three months of the calendar year, thus showing improving trends. Comps are however, still below its past trend of double-digit growth.

PriceSmart is involved in the operation of membership shopping warehouses in international markets. It had 31 warehouse clubs in operation at the end of May 2013.

PriceSmart sells good-quality basic consumer products at affordable prices. Slow economic recovery and low employment levels have led the consumers to shy away from high-priced brands. The company has thus been able to reap the benefits of this recent trend with its lower-priced brands and the private-label merchandise.

Other Stocks to Consider

PriceSmart carries a Zacks Rank #3 (Hold). Other stocks in the retail/discount industry that are worth considering include Fred’s Inc. (FRED), Costco Wholesale Corporation (COST) and Dollar Tree, Inc. (DLTR), all carrying a Zacks Rank #2 (Buy).

Read the Full Research Report on DLTR

Read the Full Research Report on COST

Read the Full Research Report on FRED

Read the Full Research Report on PSMT

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