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PriceSmart's (PSMT) April Comps Down, Dismal Run Continues

Zacks Equity Research

PriceSmart, Inc. PSMT comparable warehouse sales (comps) in April — the four-week period (ended Apr 28, 2019) — for the 40 warehouse clubs fell 0.5%, following a 1% decline in March. Comps for February and January declined 1.9% and 1.4%, respectively. Notably, foreign currency exchange rate fluctuations adversely impacted April comps by 4%.

For the thirty-four-week period (ended Apr 28, 2019), comps declined 1.3%. Foreign currency exchange rate fluctuations negatively impacted comps by 3.2%.

However, giving some respite was net merchandise sales that increased 0.9% to $242.5 million from $240.3 million in the year-ago period. Net merchandise sales were adversely impacted by $9.6 million or 4% due to currency rate fluctuations. In the preceding month, the company posted net merchandise sales growth of 0.1%, while for February the metric remained flat. In January, net merchandise sales improved 0.3%.

Net merchandise sales improved 0.4% to $2,071 million for the eight months (ended Apr 30, 2019) from $2,063.6 million in the same period last year. Foreign currency exchange rate fluctuations hurt net merchandise sales by $67.5 million or 3.3%.

Apart from comps sales, the company took the opportunity to announce that it opened a new warehouse club in Santiago de Veraguas, Panama. Notably, this is the company's sixth warehouse club in Panama. It now operates 42 warehouse clubs.

Bottom Line

Certainly, dismal comps run have a direct bearing on the company’s share performance. In the past six months, shares of this Zacks Rank #4 (Sell) company have lost approximately 14% compared with the industry's decline of 0.1%.

We note that comparable net merchandise sales in the second quarter of fiscal 2019 dipped 0.9%. Adverse currency fluctuations negatively impacted comparable net merchandise sales by 3.7%. Moreover, year-over-year decline in the bottom line and cost-related hurdles have been hurting the stock’s performance on the bourses.

In spite of these concerns, PriceSmart’s strategy to sell limited products at lower prices helped it generate member loyalty. Moreover, this operator of membership warehouse clubs’ healthy membership renewal rate reflects its strength.

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