PriceSmart, Inc. — Form 10-Q Summary
Reporting period: Fiscal third quarter and nine months ended May 31, 2024; comparisons are with the corresponding 2023 periods. Amounts are U.S. dollars. PriceSmart operates 54 membership warehouse clubs across 12 countries and the U.S. Virgin Islands.
Financial highlights
| Metric | Q3 FY2024 | Nine months FY2024 |
|---|---|---|
| Total revenue | $1.229 billion, up 12.1% | $3.688 billion, up 12.0% |
| Net merchandise sales | $1.195 billion, up 11.6%; constant-currency growth 9.1% | $3.590 billion, up 11.8%; constant-currency growth 8.3% |
| Comparable sales | Up 7.8%; constant-currency growth 5.6% | Up 8.2%; constant-currency growth 5.0% |
| Operating income | $49.9 million, up 15.9%; operating margin 4.1% versus 3.9% | $171.7 million, up 12.7%; operating margin 4.7% versus 4.6% |
| Net income / diluted EPS | $32.5 million / $1.08, versus $29.6 million / $0.94 | $109.8 million / $3.62, versus $93.8 million / $3.01 |
| Merchandise gross margin | 15.6%, up 0.3 percentage points | 15.8%, unchanged |
| Adjusted EBITDA (non-GAAP) | $71.0 million, versus $63.9 million | $232.9 million, versus $218.4 million |
Cash flow and liquidity: For the nine months, operating cash flow was $165.8 million, down from $184.7 million. Capital expenditures were $141.9 million. Investing activities used $149.4 million and financing activities used $124.3 million, including $71.9 million for treasury-stock purchases and $48.4 million of dividends. Cash, cash equivalents and restricted cash fell to $140.3 million from $252.2 million at August 31, 2023. Cash and cash equivalents were $128.3 million, and short-term investments were $99.9 million at May 31.
Debt: Short-term borrowings were $10.1 million and long-term debt totaled $135.1 million, including $36.7 million classified as current. The company reported covenant compliance. It had $160.8 million of available short-term facilities, subject to the terms of those facilities.
Changes and operating performance
- Sales growth reflected 9.4% more transactions and a 2.0% higher average ticket in Q3. The club count increased to 54 from 51 a year earlier.
- Membership income rose 15.2% in Q3 and 13.9% year to date, supported by membership growth and a $5 fee increase in most markets. Membership accounts grew 4.8%; the trailing 12-month renewal rate was 88.1%, compared with 87.1% a year earlier.
- Foreign exchange contributed about 2.5 percentage points to Q3 reported merchandise-sales growth and 3.5 points year to date. Colombia’s peso appreciation boosted reported results; currency effects reduced Caribbean sales growth.
- SG&A rose 13.4% in Q3 and 11.5% year to date. Management cited higher compensation, professional fees, depreciation and technology investment. Year-to-date results also compare against $7.7 million of prior-year CEO separation costs.
- Q3 other expense increased to $2.9 million from $1.5 million, mainly from higher interest expense and lower interest income. The nine-month effective tax rate declined to 31.3% from 32.2%; the Q3 rate increased to 30.8% from 28.9%.
Outlook, risks and notable items
- No specific revenue or earnings guidance was provided. The company plans to open a club in Cartago, Costa Rica, in spring 2025, and continues club remodels, expansions, distribution investments and digital-platform rollout.
- Management reported that Platinum membership fees had been raised by $5 in most markets and that remaining planned increases were expected to be completed by fiscal year-end. Private-label products represented 27.4% of merchandise sales year to date, versus 26.0% a year earlier.
- The board declared a one-time $1.00-per-share special dividend in addition to the $1.16 annual dividend. The $75 million repurchase program was completed in Q1; the company said it had no current plan for another program. Future dividends remain at the board’s discretion.
- Key exposures include foreign-exchange volatility, political and economic disruption, inflation and supply costs, and difficulty converting local currencies into U.S. dollars. At May 31, the company reported $41.6 million of Trinidad-dollar cash and investments and about $19.0 million of Honduran-lempira cash and short-term investments that were not readily convertible for general company use.
- Tax refund recoverability is a notable uncertainty: the company reported $39.7 million of VAT receivables and $42.8 million of income-tax receivables, with no allowance recorded. It cited ongoing disputes and complex refund processes; outcomes could differ from management’s expectations.
- Planned investment and commitments include $12.5 million of construction obligations, approximately $13.7 million for four land-purchase agreements if completed, and an anticipated $12.1 million cash outlay to outfit the relocated Miraflores club in Guatemala. Ordinary-course legal proceedings were not expected by management to materially affect results, and no material subsequent events were disclosed.
Important facts for investors to verify
- How much sales and earnings growth persists after separating comparable-store performance, new-club contributions and foreign-exchange effects.
- Whether the company can recover disputed VAT and income-tax receivables and manage alternative-minimum-tax exposure.
- Whether currency-conversion restrictions in Trinidad and Honduras affect liquidity, supplier payments or reported results.
- How elevated capital spending and shareholder distributions affect cash balances, debt and funding for planned growth.
- Progress and costs for the Cartago opening, club projects and digital rollout; the filing provides no quantified forward earnings guidance.