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PriceSmart (PSMT) Q3 Earnings Miss, Revenues Beat Estimates

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After delivering in-line earnings in the second quarter of fiscal 2018, PriceSmart, Inc. (PSMT - Free Report) reported a negative earnings surprise of 11.6% in the third quarter. This was the fourth time in the trailing five quarters that this operator of membership warehouse clubs has missed expectations. On the contrary, the top line came ahead of expectations after reporting in-line results in the preceding two quarters.

PriceSmart posted quarterly earnings of 61 cents a share that fell short of the Zacks Consensus Estimate of 69 cents, and also came a penny below from the prior-year quarter figure. The company’s bottom-line has been declining for quite some time now, in spite of increase in the top line. We note that higher cost of goods sold (up 5.7%), increased SG&A expenses (up 18.9%) and rise in other expenses might have acted as deterrents.

As a result, shares were down 7.9% during after-market trading hours yesterday. This Zacks Rank #3 (Hold) stock has increased 6.2% underperforming the industry’s advance of 8.6% in the past three months.



Let’s Delve Deep

Total revenues climbed 7.1% to $782.2 million from $730.3 million in the prior-year period. The company had 41 warehouse clubs in operation as of May 2018 compared with 39 clubs in operation as of May 2017.

Net warehouse club sales rose 5.6% year over year to $750.5 million, export sales surged 53.9% to $10 million, while membership income increased 6.8% to $12.9 million. Other revenue and income came in at $8.9 million compared with $1 million in the year-ago quarter.

This San Diego, CA-based company has also showcased decent comparable sales (comps) run. Comps have improved 3.1%, 1.9%, 3.5%, 4.4% and 0.5% in the months of May, April, March, February and January, respectively.

Operating income grew 2.9% to $28.4 million, however, operating margin contracted 20 basis points to 3.6%. Operating margins might have been hurt by higher SG&A expenses, as a percentage of total revenues that came in at 12.9% compared with 11.6% in the year-ago period.

Other Financial Aspects

PriceSmart ended the quarter with cash and cash equivalents of $141.2 million and long-term debt (including current portion) of $105.9 million. The company’s shareholders’ equity was $750.1 million, excluding non-controlling interests of $592,000.

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Fossil Group (FOSL - Free Report) delivered an average positive earnings surprise of 54.1% in the trailing four quarters. It carries a Zacks Rank #2 (Buy).

Burlington Stores (BURL - Free Report) delivered an average positive earnings surprise of 17.8% in the trailing four quarters. It has a long-term earnings growth rate of 18.1% and a Zacks Rank #2.

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