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PriceSmart's (PSMT) Comps Rise for Second Straight Month

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PriceSmart, Inc. PSMT comparable warehouse sales (comps) for the four-week period (ended Jul 28, 2019) for 41 warehouse clubs grew 1.6%, following a 1.9% increase in June. This marked the second straight month of comps improvement. However, foreign currency exchange rate fluctuations adversely impacted comps by 2.6%.

It seems that management’s efforts are gradually reaping benefits, as the company in the past had witnessed dismal comps performance. We noted that comps in the months of May, April and March had dropped 0.9%, 0.5% and 1%, respectively.

For the 47-week period (ended Jul 28, 2019), comps declined 0.8%. Foreign currency exchange rate fluctuations negatively impacted comps by 3.2%.

Net merchandise sales grew 2.8% to $255.8 million from $248.9 million in the year-ago period. However, the metric was adversely impacted by currency rate fluctuations to the tune of $6.4 million or 2.5%. Prior to this, net merchandise sales had increased 3.9%, 0.8%, 0.9% and 0.1% in the months of June, May, April and March, respectively.

PriceSmart, Inc. Price and Consensus

For the 11 months (ended Jul 31, 2019), net merchandise sales grew 0.9% to $2,831.4 million from $2,805 million in the year-ago period. Foreign currency exchange rate fluctuations negatively impacted sales by 3.2%.

Certainly, PriceSmart’s strategy to sell limited products at low prices helped it generate member loyalty. Moreover, the company’s healthy membership renewal rate reflects its strength. This operator of membership warehouse clubs ended the third quarter with roughly 1.6 million accounts, while membership income grew 2.2%. The renewal rate for the 12-month period (ended May 2019) was 85%.

Moreover, this Zacks Rank #2 (Buy) company has been focusing on adding local and regional distribution centers to augment smooth flow of merchandise. Also, it is experimenting new small warehouse club format. The company invested in four new warehouse clubs across Panama, the Dominican Republic and Guatemala. It now operates 43 warehouse clubs.

Recently, the company also unveiled its plan to open warehouse club in Costa Rica. Notably, this marked its eighth warehouse club in Costa Rica. The club is anticipated to open in the summer of 2020.

In the past three months, this San Diego, CA-based company has increased roughly 4% compared to the industry’s rise of 5.3%. We note that, the stock has increased 7.2% in a month against the industry’s decline of 2.8%.

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