Market Overview

PriceSmart Announces Fiscal 2020 Third Quarter Operating Results

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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 46th 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 47th 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)

















May 31,






2020


August 31,



(Unaudited)


2019

ASSETS







Current Assets:







Cash and cash equivalents


$

261,788


$

102,653

Short-term restricted cash



240



54

Short-term investments



40,042



17,045

Receivables, net of allowance for doubtful accounts of $126 as of May 31, 2020 and $144
as of August 31, 2019, respectively



10,886



9,872

Merchandise inventories



268,762



331,273

Prepaid expenses and other current assets (includes $0 and $2,736 as of May 31, 2020 and
August 31, 2019, respectively, for the fair value of derivative instruments)



24,736



30,999

Total current assets



606,454



491,896

Long-term restricted cash



3,996



3,529

Property and equipment, net



700,388



671,151

Operating lease right-of-use assets, net



121,802



Goodwill



45,316



46,101

Other intangibles, net



10,772



12,576

Deferred tax assets



21,178



15,474

Other non-current assets (includes $428 and $0 as of May 31, 2020 and August 31, 2019,
respectively, for the fair value of derivative instruments)



53,965



44,987

Investment in unconsolidated affiliates



10,618



10,697

Total Assets


$

1,574,489


$

1,296,411

LIABILITIES AND EQUITY







Current Liabilities:







Short-term borrowings


$

70,886


$

7,540

Accounts payable



283,045



286,219

Accrued salaries and benefits



28,017



25,401

Deferred income



24,154



25,340

Income taxes payable



9,613



4,637

Other accrued expenses and other current liabilities (includes $30 and $0 as of May 31,
2020 and August 31, 2019, respectively, for the fair value of derivative instruments)



35,622



32,442

Operating lease liabilities, current portion



8,409



Dividends payable



10,719



Long-term debt, current portion



22,784



25,875

Total current liabilities



493,249



407,454

Deferred tax liability



1,489



2,015

Long-term portion of deferred rent





11,198

Long-term income taxes payable, net of current portion



4,865



5,069

Long-term operating lease liabilities



126,275



Long-term debt, net of current portion



117,045



63,711

Other long-term liabilities (includes $5,567 and $2,910 for the fair value of derivative
instruments and $6,099 and $5,421 for post-employment plans as of May 31, 2020 and
August 31, 2019, respectively)



11,963



8,685

Total Liabilities



754,886



498,132



 

PRICESMART, INC.

CONSOLIDATED BALANCE SHEETS

(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)















Stockholders' Equity:







Common stock $0.0001 par value, 45,000,000 shares authorized; 31,425,075 and
31,461,359 shares issued and 30,648,990 and 30,538,788 shares outstanding (net of
treasury shares) as of May 31, 2020 and August 31, 2019, respectively



3



3

Additional paid-in capital



444,403



443,084

Tax benefit from stock-based compensation



11,486



11,486

Accumulated other comprehensive loss



(168,019)



(144,339)

Retained earnings



562,408



525,804

Less: treasury stock at cost, 776,085 shares as of May 31, 2020 and 924,332 shares
as of August 31, 2019



(31,615)



(38,687)

Total stockholders' equity attributable to PriceSmart, Inc. stockholders



818,666



797,351

Noncontrolling interest in consolidated subsidiaries



937



928

Total stockholders' equity 



819,603



798,279

Total Liabilities and Equity


$

1,574,489


$

1,296,411

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/pricesmart-announces-fiscal-2020-third-quarter-operating-results-301091128.html

SOURCE PriceSmart, Inc.

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