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November Comps Rise at PriceSmart

Zacks Equity Research

San Diego-based retail warehouse stores operator, PriceSmart, Inc. (PSMT) recently announced net and comparable sales for November as well as for the three months ended Nov 30, 2012.

The company reported 13.2% growth in net sales to $183.7 million for the month, continuing with its trend of reporting double-digit growth. PriceSmart reported 7.8% year-over-year increase in comparable warehouse sales for the five weeks ended Nov 30, 2012. The company had 30 warehouse clubs in operation at the end of the month, out of which 29 were operational throughout the last 12 months.

For the three months ended Nov 30, 2012, net sales grew 11.8% to $523.6 million. The comparable warehouse sales for thirteen weeks ended Nov 30, 2012, increased 8.3% year over year.

PriceSmart, which competes against Family Dollar Stores Inc. (FDO), is involved in the operation of membership shopping warehouses in international markets. The company sells good-quality basic consumer products at affordable prices.

PriceSmart has been reaping the benefits of a shift in consumer preference. Consumers are shifting toward lower-priced brands and private-label merchandise sold by the company due to slow economic recovery, low employment level and reduced consumer spending. This business model helps PriceSmart to consistently generate strong sales, earn profits and offset low margins.

The company is scheduled to release its first quarter 2012 results later this month or early January 2013. The Zacks Consensus Estimate for the quarter is pegged at 63 cents, representing year-over-year growth rate of almost 33%.

We appreciate the double-digit growth in sales achieved by the company and we expect the trend to continue in December as well due to the holiday season. However, currency headwinds are a matter of concern. PriceSmart carries a Zacks #3 Rank in the near term (Hold rating). We currently have a Neutral recommendation on the stock.

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