PriceSmart Announces Fiscal 2020 Third Quarter Operating Results

Rhea-AI Summary

PriceSmart, Inc. (NASDAQ: PSMT) reported its third-quarter results for fiscal year 2020, ending May 31, 2020. The company focused on employee and member safety while adapting to remote work amidst challenges. Key initiatives included enhancing supply chain management and implementing precautionary measures for staff. The ongoing commitment to best practices has positioned the company to better serve its members during these times. The leadership team prioritized constant communication to navigate the evolving situation, emphasizing resilience and collaboration.

Positive

• Strong commitment to employee and member safety amidst challenges.
• Adaptation to remote work without compromising effectiveness.
• Enhanced collaboration with vendors to secure essential goods.

Negative

• None.

SAN DIEGO, July 9, 2020 /PRNewswire/ -- PriceSmart, Inc. (NASDAQ: PSMT), operator of 46 warehouse clubs in 12 countries and one U.S. territory, today announced its results of operations for the third quarter of fiscal year 2020 which ended on May 31, 2020.

Comments from Sherry S. Bahrambeygui, Chief Executive Officer:

"During the third quarter of fiscal year 2020, our Company has traversed an extraordinary arc that started with responding to unexpected challenges and quickly evolved to strengthening our business for the future.

With our top priority firmly placed on the well-being of our employees and Members, the quarter began with the rapid adaptation to remote-work without compromising effectiveness. We immediately focused on precautionary and safety measures for our front-line employees in-country and in our distribution centers internationally. Our Company then led the way in best practices in-country to strive to keep our members and the public safe. We focused on collaborating with our vendors and suppliers to protect the supply chain and maximize availability of essential goods needed by our Members. We reformed how our Leadership Team oversees and directs all aspects of the Company. We engaged in collaborative and constant communication enabling us to move immediately into a forward-looking and expedited development of our online presence and communication with our Members. As a result, we launched our Click & Go™ program, which enables online orders with curbside pick-up and minimal contact, to meet the immediate demands of our Members. As we experienced our Members' rapid adoption of this shopping channel, we accelerated our roll-out of the service throughout our Company. We ended June with 2.7% penetration of net merchandise sales. We now provide Click & Go™ contactless shopping, online visibility of inventory, online payment platforms, and the ability to sign up and renew memberships online in every one of our markets and all but one of our 46 clubs. We believe the technology, business infrastructure, processes, and platforms that support the Click & Go™ program strengthens our foundation for growth.

At the beginning of the third quarter, we carefully considered the risks of the unknown and preserved cash and suspended certain capital expenditures and discretionary spending. Within a relatively short time, we restarted multiple capital projects and proceeded with the opening on June 17, 2020 of our 46^th Club in Liberia, Costa Rica which was adeptly handled by the tremendous in-country team and with the close, but remote involvement of the Leadership Team internationally. As previously announced, we also look forward to the opening of our 47^th club in the second quarter of fiscal year 2021, which will be located in the metropolitan area of Bogota, Colombia.

The COVID-19 pandemic, which has been described as the "great accelerator" for the retail industry, has tested all of us on many dimensions. This is a unique time when issues related to health, social equity, economics and fundamental ways of doing business on a global scale are requiring our best efforts. I am so very proud of how our team has taken this opportunity to embrace these challenges and excel by being nimble, learning more effective practices and remaining vigilant about protecting our core values. I send you my warmest wishes for health and well-being and look forward as we all navigate this ongoing environment to emerge stronger than ever."

Third Quarter Financial Results

Total revenues for the third quarter of fiscal year 2020 increased 1.4% to $799.9 million compared to $788.6 million in the third quarter of the prior year. For the third quarter of fiscal year 2020, net merchandise sales increased 1.8% to $768.4 million from $755.0 million in the third quarter of fiscal year 2019. Foreign currency exchange rate fluctuations impacted net merchandise sales negatively by $19.3 million or 2.5% of net merchandise sales.

The Company had 45 clubs in operation as of May 31, 2020, compared to 42 warehouse clubs in operation as of May 31, 2019.

For the thirteen-week period ended May 31, 2020, comparable net merchandise sales decreased 3.6% compared to the same thirteen-week period a year ago. Foreign currency exchange rate fluctuations impacted comparable net merchandise sales negatively by $18.4 million, or 2.5% of comparable net merchandise sales.

The Company recorded operating income for the third quarter of fiscal year 2020 of $24.0 million, as compared to operating income of $22.0 million in the prior year. Net income attributable to PriceSmart was $12.7 million, or $0.41 per diluted share, in the third quarter of fiscal year 2020. Net income in the third quarter of fiscal year 2019 was $14.1 million, or $0.46 per diluted share.

The Company reports comparable net merchandise sales on a "same week" basis with 13 weeks in each quarter beginning on a Monday and ending on a Sunday. The periods are established at the beginning of the fiscal year to provide as close a match as possible to the calendar month and quarter that is used for financial reporting purposes. This approach equalizes the number of weekend days and weekdays in each period for improved sales comparison, as we experience higher merchandise club sales on the weekends. Each of the warehouse clubs used in the calculations was open for at least 13 ½ calendar months before its results for the current period were compared with its results for the prior period. 

The term "currency exchange rates" refers to the currency exchange rates we use to convert net merchandise and comparable net merchandise sales for all countries where the functional currency is not the U.S. dollar into U.S. dollars. The Company calculates the effect of changes in currency exchange rates as the difference between current period activities translated using the current period's currency exchange rates, and the comparable prior year period's currency exchange rates. The disclosure of the effects of currency exchange rate fluctuations on the Company's results permits investors to understand better the Company's underlying performance.

PriceSmart management plans to host a conference call at 12:00 p.m. Eastern time (9:00 a.m. Pacific time) on Friday, July 10, 2020, to discuss the financial results. Individuals interested in participating in the conference call may do so by dialing (855) 209-8211 for domestic callers or (412) 317-5214 for international callers, and asking to join the PriceSmart, Inc. call. A digital replay will be available through July 17, 2020, following the conclusion of the call by dialing (877) 344-7529 for domestic callers, or (412) 317-0088 for international callers, and entering replay access code 10143985.

About PriceSmart

PriceSmart, headquartered in San Diego, owns and operates U.S.-style membership shopping warehouse clubs in Latin America and the Caribbean, selling high quality merchandise and services at low prices to PriceSmart members. PriceSmart operates 46 warehouse clubs in 12 countries and one U.S. territory (eight in Costa Rica; seven each in Colombia and Panama; five in the Dominican Republic; four in Trinidad and Guatemala; three in Honduras; two each in El Salvador and Nicaragua; and one each in Aruba, Barbados, Jamaica and the United States Virgin Islands). The Company is currently constructing and plans to open a warehouse club in Bogota, Colombia in the second quarter of fiscal year 2021.

This press release may contain forward-looking statements concerning the Company's anticipated future revenues and earnings, adequacy of future cash flow, proposed warehouse club openings, the Company's performance relative to competitors, the outcome of tax proceedings and related matters. These forward-looking statements include, but are not limited to, statements containing the words "expect," "believe," "will," "may," "should," "project," "estimate," "anticipated," "scheduled," and like expressions, and the negative thereof. These statements are subject to risks and uncertainties that could cause actual results to differ materially including, but not limited to: adverse changes in economic conditions in the Company's markets, natural disasters, compliance risks, volatility in currency exchange rates, competition, consumer and small business spending patterns, political instability, increased costs associated with the integration of online commerce with our traditional business, whether the Company can successfully execute strategic initiatives, breaches of security or privacy of member or business information, cost increases from product and service providers, interruption of supply chains, member or business information, cost increases from product and service providers, interruption of supply chains, COVID-19 related factors and challenges, including among others, the duration of the pandemic, the unknown long-term economic impact, the impact of government policies and restrictions that have limited access for our members, and shifts in demand away from discretionary or higher priced products to lower priced products, exposure to product liability claims and product recalls, recoverability of moneys owed to PriceSmart from governments, and other important factors discussed under the captions "Item 1A. Risk Factors" and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended August 31, 2019 filed with the United States Securities and Exchange Commission ("SEC") on October 29, 2019 and our Quarterly Report on Form 10-Q for the three months ended February 29, 2020 filed with the SEC on April 8, 2020. These risk factors may be updated from time to time in our other filings with the SEC, which are accessible on the SEC's website at www.sec.gov. Forward-looking statements speak only as of the date that they are made, and the Company does not undertake to update them, except as required by law.

For further information, please contact Michael L. McCleary, EVP, Chief Financial Officer and Principal Accounting Officer (858) 404-8826 or send an email to ir@pricesmart.com.

PRICESMART, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
		Three Months Ended		Nine Months Ended
		May 31,		May 31,		May 31,		May 31,
		2020		2019		2020		2019
Revenues:
Net merchandise sales		$	768,368		$	755,009		$	2,418,822		$	2,322,742
Export sales			8,321			8,281			25,029			23,314
Membership income			13,525			13,132			41,364			38,717
Other revenue and income			9,717			12,134			33,392			37,845
Total revenues			799,931			788,556			2,518,607			2,422,618
Operating expenses:
Cost of goods sold:
Net merchandise sales			661,258			649,894			2,067,416			1,996,595
Export sales			7,995			7,872			24,044			22,136
Non-merchandise			3,503			4,121			12,416			13,194
Selling, general and administrative:
Warehouse club and other operations			78,431			78,231			241,826			228,161
General and administrative			24,408			24,532			77,910			76,835
Pre-opening expenses			257			1,647			1,254			1,759
Loss on disposal of assets			112			262			251			735
Total operating expenses			775,964			766,559			2,425,117			2,339,415
Operating income			23,967			21,997			93,490			83,203
Other income (expense):
Interest income			554			310			1,433			1,124
Interest expense			(2,564)			(915)			(5,116)			(2,949)
Other income (expense), net			(1,564)			159			(1,826)			(2,032)
Total other expense			(3,574)			(446)			(5,509)			(3,857)
Income before provision for income taxes and loss of unconsolidated affiliates			20,393			21,551			87,981			79,346
Provision for income taxes			(7,744)			(7,478)			(29,849)			(26,721)
Loss of unconsolidated affiliates			(16)			(4)			(79)			(48)
Net income			12,633			14,069			58,053			52,577
Less: net (income) loss attributable to noncontrolling interest			72			27			(20)			(59)
Net income attributable to PriceSmart, Inc.		$	12,705		$	14,096		$	58,033		$	52,518
Net income attributable to PriceSmart, Inc. per share available for distribution:
Basic		$	0.41		$	0.46		$	1.90		$	1.73
Diluted		$	0.41		$	0.46		$	1.90		$	1.73
Shares used in per share computations:
Basic			30,271			30,198			30,268			30,192
Diluted			30,275			30,205			30,273			30,202
Dividends per share		$	—		$	—		$	0.70		$	0.70

 

PRICESMART, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

FAQ

What are PriceSmart's third-quarter results for fiscal year 2020?

PriceSmart reported its third-quarter results for fiscal year 2020, focusing on employee safety and effective remote work.

How did PriceSmart adapt to challenges during the third quarter?

PriceSmart adapted by implementing precautionary measures, enhancing supply chain management, and focusing on collaboration.

What is the stock symbol for PriceSmart?

The stock symbol for PriceSmart is PSMT.

What measures did PriceSmart take to ensure safety during the pandemic?

PriceSmart implemented safety measures and adapted operations to protect employees and members.

What is PriceSmart's approach to supply chain management?

PriceSmart focused on collaborating with suppliers to maximize the availability of essential goods.