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PriceSmart's December Comps Decline on Currency Headwinds

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PriceSmart, Inc.’s PSMT positive comparable net merchandise sales (comps) streak ended in December. We note that comps for the four-week period (ended Dec 29, 2019) fell 0.1% for 41 warehouse clubs. Foreign currency exchange rate fluctuations adversely impacted comps by 0.3%.

Prior to December, the metric had improved 0.8%, 1.4% 0.9%, 1.1%, 1.6% and 1.9% in November, October, September, August, July and June, respectively.

Again, comps for the 17-week period (ended Dec 29, 2019) increased 0.7%. However, adverse foreign currency exchange rate fluctuations negatively impacted comps by 1.2%.

Net merchandise sales for the month of December grew 4.3% to $362.1 million from $347.1 million in the year-ago period. However, the metric was adversely impacted by currency rate fluctuations to the tune of $1.1 million or 0.3%. Prior to this, net merchandise sales had increased 7.5%, 3.7%, 1.2%, 4.5% and 2.8%, in the months of November, October, September, August and July, respectively.

We note that, shares of this San Diego, CA-based company have gained 24.2% in the past three months, compared with the industry’s growth of 13.1%.

PriceSmart’s strategy to sell limited products at low prices helped it gain member loyalty. Moreover, the company’s healthy membership renewal rate reflects its strength. This operator of membership warehouse clubs ended fourth-quarter fiscal 2019 with 1.6 million accounts, while membership income grew 4.2%.

The company has been focusing on adding local and regional distribution centers to augment smooth flow of merchandise. Moreover, it is experimenting with the new small warehouse club format.

Also, PriceSmart had declared that it opened a new warehouse club in Guatemala City, Guatemala on Nov 13, 2019. This brings the total number of warehouse clubs in operation to 45.

PriceSmart is constructing and plans to open warehouse clubs in Liberia, Costa Rica, in the summer this year. It is also constructing and plans to open new warehouse clubs in Bogota, Colombia in the fall of 2020. It plans to build and inaugurate new warehouse clubs in Portmore, Jamaica and Bucaramanga, Colombia in the fall of 2020.

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