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PriceSmart Continues With Positive Comps Tend in September

Zacks Equity Research

PriceSmart, Inc.’s PSMT comparable warehouse sales (comps) for the four weeks ended Sep 29, 2019 for 41 warehouse clubs improved 0.9%, thereby marking the fourth straight month of comps improvement. This follows an increase of 1.1%, 1.6% and 1.9% in August, July and June, respectively. However, foreign currency exchange rate fluctuations adversely impacted comps by 2.1%.

Nevertheless, it seems that management’s efforts are gradually reaping benefits, as the company had witnessed dismal comps performance in the past. We noted that comps in the months of May, April and March had dropped 0.9%, 0.5% and 1%, respectively.

A clear reflection of the company’s endeavors is visible in the stock’s movement on the bourses. In the past three months, shares of this San Diego, CA-based company have gained roughly 21.7% compared with the industry’s growth of 8.5%.

Net merchandise sales for the month of September grew 1.2% to $246.6 million from $243.7 million in the year-ago period. However, the metric was adversely impacted by currency rate fluctuations to the tune of $5.1 million or 2.1%. Prior to this, net merchandise sales had increased 4.5%, 2.8%, 3.9%, 0.8% and 0.9% in the months of August, July, June, May and April, respectively.

Wrapping Up

Certainly, PriceSmart’s strategy to sell limited products at low prices helped it gain member loyalty. Moreover, the company’s healthy membership renewal rate reflects its strength. This operator of membership warehouse clubs ended third-quarter fiscal 2019 with roughly 1.6 million accounts, while membership income grew 2.2%.

Moreover, the company has been focusing on adding local and regional distribution centers to augment smooth flow of merchandise. Moreover, it is experimenting with the new small warehouse club format.

PriceSmart is constructing and plans to open warehouse clubs in Panama City, Panama in October 2019, and San Cristobal, Guatemala, in November 2019. The company also plans to build a new warehouse club in Liberia, Costa Rica and intends to open the same in summer next year. It also plans to build and inaugurate new warehouse clubs in Portmore, Jamaica; Bogota and Bucaramanga, Colombia in the fall next year.

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