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PriceSmart (PSMT) June Comps Fail to Impress Investors

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PriceSmart, Inc.’s (PSMT - Free Report) decent comparable sales has somehow derailed in the month of June. This San Diego, CA-based company registered comparable sales growth of 0.6% for four weeks ended Jul 1, 2018. This follows an increase of 3.1%, 1.9%, 3.5%, 4.4% and 0.5% for May, April, March, February and January, respectively.

The soft comparable warehouse sales performance came amid mixed third-quarter fiscal 2018 results, wherein the bottom line fell short of expectations, while revenues surpassed the same.

Quite apparent, investors were not impressed with the results, and their apprehensions were evident from the stock’s plunge of roughly 10.7% on Jul 6, 2018. We note that this Zacks Rank #3 (Hold) stock has declined 5.3% against the Retail-Discount Stores industry’s advance of 8.8% in the past three months.

Meanwhile, net warehouse club sales for the month of June rose 5.9% year over year to $243.7 million. The company had recorded sales increase of 6.2%, 1.6%, 8.9%, 6.6% and 6.2% in May, April, March, February and January, respectively.

For the 10 months ending Jun 30, 2018, net warehouse club sales jumped 5.2% to $2,556.1 million. Further, comparable warehouse club sales were up 2.8% for the 43-week period compared with the year-ago period.

We note that PriceSmart’s comparable sales rose 2.7%, while net warehouse club sales rose 5.6% during the third quarter. However, this operator of membership warehouse clubs continues to witness year-over-year decline in earnings per share. The company 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. This was the fourth time in the trailing five quarters that the company has missed the consensus mark.

The industry, to which PriceSmart belongs, occupies a space in the bottom 31% (176 out of 256) among the Zacks industries. The industry of late has been bearing the brunt of heightened online competition thanks to Amazon (AMZN - Free Report) , lower footfall and changing consumer spending patterns. These headwinds have compelled retailers to re-examine their strategies. They are now focusing more on enhancing omni-channel capabilities, optimizing store fleet and restructuring activities.

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Urban Outfitters (URBN - Free Report) delivered an average positive earnings surprise of 19.8% in the trailing four quarters. It has a long-term earnings growth rate of 12% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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 (Buy).

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