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PriceSmart 2Q Earnings Beat; Sales Miss

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Retail warehouse stores operator PriceSmart, Inc. (PSMT - Free Report) recently reported second quarter fiscal 2013 results along with net sales and comparable sales figures for the month of Mar 2013.

Quarter Details

PriceSmart reported adjusted earnings (excluding special items) of 82 cents per share in the second quarter of fiscal 2013 (ended Feb 28, 2013), surpassing the Zacks Consensus Estimate of 80 cents by 2.5%. Earnings grew 22.4% from the prior-year quarter earnings of 67 cents, as lukewarm revenue growth was offset by operating income growth.

The company reported total revenue of $607.4 million in the second quarter, up 10.8% from the prior-year quarter.  Net warehouse club sales increased 10.1% to $591.9 million in the quarter. Revenues, however, lagged the Zacks Consensus Estimate of $614 million. We believe the lesser number of selling days in the quarter versus last year may have hurt overall top line growth.

The company had 30 operating clubs at the end of Feb 28, 2013 compared with 29 in the prior-year period. Operating income grew 20.5% in the quarter to $36.5 million.

The company has cash and cash equivalents of $101.2 million as of Feb 28, 2013 compared with $84.4 million as of Nov 30, 2012.

March 2013 Results

Concurrent with second quarter results, PriceSmart also announced net and comparable warehouse club sales for the month of March. Net warehouse club sales grew 11.5% to $192.3 million for the month. Further, PriceSmart reported 7.9% year-over-year increase in comparable warehouse sales for 29 warehouse clubs for the four weeks ended Mar 31, 2013.

PriceSmart had previously reported an 8.9% year-over-year increase in comps and 7.8% top line growth for the month of Feb 2013, much below its trend of reporting double-digit growth. Sales in the month were hurt by one less selling day in February this year as the previous year was a leap year.

PriceSmart is involved in the operation of membership shopping warehouses in international markets. The company sells good-quality basic consumer products at affordable prices. PriceSmart has been reaping the benefits of a shift in consumer preference. Consumers are shifting toward lower-priced brands and private-label merchandise sold by the company due to slow economic recovery, low employment level and reduced consumer spending. This business model helps PriceSmart to consistently generate strong sales, earn profits and offset low margins.

Other Stocks to Consider

PriceSmart carries a Zacks Rank #4 (Sell). Other stocks in the retail/discount industry that are worth considering include Sears Holdings Corporation - Zacks Rank #1 (Strong Buy) and Costco Wholesale Corporation (COST - Free Report) - Zacks Rank #2 (Buy). In the broader consumer staples sector, Flower Foods, Inc (FLO - Free Report) carries Zacks Rank #1 (Strong Buy).

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Costco Wholesale Corporation (COST) - free report >>

Flowers Foods, Inc. (FLO) - free report >>

PriceSmart, Inc. (PSMT) - free report >>

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