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PriceSmart (PSMT) Q1 Earnings Beat, December Comps Robust

Zacks Equity Research

PriceSmart, Inc. PSMT continued with its upbeat earnings performance in first-quarter fiscal 2019, delivering the second straight quarter of bottom-line beat. However, sales missed estimates. Concurrently, the company announced sales and comparable net merchandise sales (comps) results for the four weeks ended Dec 30, 2018.

Q1 in Detail

The company posted earnings of 69 cents a share, which outpaced the Zacks Consensus Estimate of 52 cents. However, the bottom line declined 6.8% on a year-over-year basis due to costs related with Aeropost and omni-channel development initiatives.

Including one-time items, earnings for the reported quarter were 48 cents, down 22.6% from the prior-year quarter.

PriceSmart, Inc. Price, Consensus and EPS Surprise

PriceSmart, Inc. Price, Consensus and EPS Surprise | PriceSmart, Inc. Quote

Total sales grew 1.6% to $779.6 million from $767.1million in the prior-year period. However, top-line missed the Zacks Consensus Estimate of $795 million.

Net merchandise sales rose 0.3% year over year to $747.4 million in the fiscal first quarter, while export sales increased 0.5% to $8.2 million. Meanwhile, membership income climbed 2.9% to $12.7 million. Other revenues and income came in at $11.3 million compared with $1.1 million in the year-ago quarter.

Comps for the 40 warehouse clubs decreased 2.1% due to adverse currency fluctuations.

Operating income declined 25.6% to $24.7 million while operating margin contracted around 110 basis points to 3.2%. Operating margins were hurt by higher expenses. Warehouse club and other operations expenses came in at $74.2 million, up 6.8% from the year-ago quarter. General and administrative expenses increased 45.2% to $27.3 million.

As of November 2018, the company had 41 warehouse clubs in operation compared with 40 clubs in operation in November 2017.

December Sales & Comps

For four weeks ended Dec 30, 2018, PriceSmart reported decent net merchandise sales, following a 1% decline in the preceding month. The company’s net merchandise sales in December increased about 0.9% to $347.1 million from $344.2 million a year ago. Certainly, the company’s strategy to sell limited products at lower prices has helped it to generate member loyalty and higher sales. Meanwhile, comps for the month increased 0.4%.

Other Financial Aspects

PriceSmart ended the fiscal first quarter with cash and cash equivalents of $81 million and long-term debt (including current portion) of $79.9 million. The company’s shareholders’ equity was $765.4 million, excluding non-controlling interests of $670,000.

Price Performance

In the past three months, this Zacks Rank #3 (Hold) stock has slumped roughly 18%, much wider than the industry’s 4.5% decline.

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Casey's General Stores, Inc. CASY has a long-term earnings growth rate of 8.9% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Macy's, Inc. M delivered average positive earnings surprise of 37.9% in the trailing four quarters. It has a long-term earnings growth rate of 8.5% and a Zacks Rank #2.

L Brands, Inc. LB has a long-term earnings growth rate of 11% and a Zacks Rank #2.

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