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What's in the Offing for PriceSmart (PSMT) in Q3 Earnings?

Zacks Equity Research

PriceSmart, Inc. PSMT is slated to report third-quarter fiscal 2019 results on Jul 10. In the last four quarters, this San Diego, CA-based operator of membership shopping warehouse clubs outperformed the Zacks Consensus Estimate by an average of 20.7%. Let’s delve deeper into the factors that are likely to influence the results.

How Are Estimates Shaping Up?

The Zacks Consensus Estimate for earnings for the quarter under review is pegged at 46 cents compared with 61 cents reported in the year-ago quarter. We note that the Zacks Consensus Estimate has remained unchanged in the past 30 days. The Zacks Consensus Estimate for revenues is pegged at $803.8 million, indicating an increase of roughly 2.8% from the year-ago quarter.

Factors Playing Key Role

PriceSmart has been grappling with soft comparable warehouse sales performance for quite some time now. We note that comparable warehouse sales in May fell 0.9%, following a decline of 0.5% in April. The impact of adverse currency fluctuations on comparable warehouse sales cannot be ignored which hurt the metric by 3.9% during the month of May.

Additionally, PriceSmart has been battling cost-related hurdles. During the second quarter of fiscal 2019, warehouse club and other operations expenses increased by 5.2%, while general and administrative expenses surged 23.3%. Persistence of these headwinds remains a threat to margins.

Certainly, PriceSmart’s strategy to sell limited products at lower prices helped it in generating member loyalty. Moreover, this operator of membership warehouse clubs’ healthy membership renewal rate reflects its strength. The company also focuses on increasing the number of private label products. Moreover, the company has been concentrating on adding local and regional distribution centers to augment smooth flow of merchandise. Apart from these, the company is experimenting new small warehouse club format.

What the Zacks Model Unveils

Our proven model does not conclusively show that PriceSmart is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

PriceSmart has a Zacks Rank #3 and an Earnings ESP of 0.00%, consequently making the surprise prediction difficult.

Stocks With Favorable Combination

Here are few companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Stitch Fix, Inc. SFIX has an Earnings ESP of +3.71% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Capri Holdings Limited CPRI has an Earnings ESP of +12.30% and a Zacks Rank #3.

Urban Outfitters, Inc. URBN has an Earnings ESP of +1.12% and a Zacks Rank #3.

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