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PriceSmart October Comps Mark Second Straight Monthly Rise

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·4 min read
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  • PSMT
  • ZUMZ
  • TPR

Shares of PriceSmart, Inc. PSMT have increased 3.5% since the company released impressive sales numbers for October on Nov 9. Apparently, comparable net merchandise sales (comps) for the four weeks ended Oct 25, 2020, edged up 4.1% for 43 warehouse clubs. Comps were hurt by foreign-currency fluctuations to the tune of $8 million or 3.5%. Notably, this marked the company’s comps’ second consecutive monthly increase, following a rise of 0.3% for September.

Moreover, net merchandise sales during the month under review grew 10.4% to $280.3 million from $254 million in the year-ago period. However, currency rate fluctuations negatively impacted the metric by $9.1 million or 3.6%.

For the fiscal year to date, including two months ended Oct 31, 2020, net merchandise sales rose 7.5% to $538.4 million compared to $500.7 million reported in the year-ago period. Foreign-currency fluctuations hurt the metric by 3.6% or $17.7 million. Also, comps for the 8-week period ended Oct 25, 2020, inched up 2.2% year over year, with foreign-currency fluctuations adversely affecting comps by 3.5% or $16 million.

Encouragingly, PriceSmart saw continued improvement in comps and net merchandise sales in the Colombian and Caribbean markets, while it witnessed negative comps across certain markets in Central America. Unsurprisingly, the opening of new clubs in Panama and Guatemala hurt comps owing to sales transfers from the existing clubs. Despite 20 club days lost in October, the company registered growth in comps and sales. Meanwhile, Panama, which is among the company’s key markets, lifted restrictions on the days clubs could be open with no limitations.

Robust Online Capabilities

We note that management remains committed to enhancing online capabilities and developing innovative ways to better serve its members. PriceSmart is progressing well with the technology-enabled shopping like the Click & Go contactless online ordering. Moreover, the curbside-pickup service is available across all its markets, with delivery options being extended to 13 markets compared to nine in the prior month.

Management remains focused on driving efficiencies across its new sales channels to boost value for members. This Click & Go service, along with curbside pickup and delivery, accounted for nearly 3% of the overall net merchandise sales during the month under review. The company believes that Click & Go delivery service will contribute a higher proportion to the total Click & Go service sales. In fact, PriceSmart believes that Click & Go, coupled with its other online capabilities, will continue to help it efficiently cater to its members in the long run.

Although PriceSmart witnessed improvements with respect to clubs being open and eased restrictions, the possibility for future restrictions remain with the days of club closures. Nonetheless, management is preparing for different scenarios that may arise in the coming months. It is on track for a solid start to fiscal 2021, including new practices and improvements, and is well poised to maneuver challenges to drive growth.

Currently, the company operates 46 warehouse clubs across 12 countries and one U.S. territory. PriceSmart informed that it has been constructing and planning to inaugurate a warehouse club in Bogota, Colombia, in December this year. A glimpse at the company’s price performance reveals that shares of this membership-shopping warehouse club operator have increased 45.4% in the past six months compared to the industry’s 26.1% gain.

Key Picks in Retail

Tapestry TPR has a long-term earnings-growth rate of 9.3% and currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Boot Barn BOOT, also a Zacks Rank #1 stock with a long-term earnings-growth rate of 20%.

Zumiez ZUMZ has delivered an earnings surprise of 41.2% in the last four quarters, on average. The company currently has a Zacks Rank of 1.

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