PriceSmart, Inc. Delivers Sales Gains With Rising Costs

By Markets Fool.com

Warehouse club PriceSmart today released earnings results for its fiscal first quarter. Here are the key numbers from the announcement.

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  • Net revenue rose to $656 million from $606 million in the prior-year period.
  • Profit fell to $0.68 per share, below last year's $0.71-per-share haul.
  • The store base expanded year over year from 32 locations to 36, including three new clubs in Colombia, and one in Panama.

Splitting expectations
PriceSmart, the largest operator of Costco-style membership clubs in Central America, managed a slight beat on the top line, but came up short of analysts' earnings expectations. Wall Street had been looking for a less robust quarterly revenue of $650 million, along with a higher per-share profit of $0.73.

While the company will provide investors more detail in its conference call tomorrow, the likely culprit for that earnings miss is higher-than-expected store-opening costs. Pre-opening expenses in the previous quarter jumped to $1.4 million from $160,000. And management said at the time that the increase was due to additional costs around the launch of its Bogata, Colombia, location.

Likewise, in this quarter, PriceSmart christened two additional warehouses in Colombia, one in Medellin, and one in Pereira, which would have boosted those costs. In fact, pre-opening expenses rose to $3 million this quarter, as compared to just $474,000 in the prior-year period.

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PriceSmart's new Medellin, Colombia location. Source: PriceSmart.

Meanwhile, membership income clocked a healthy 9% improvement to just more than $10 million.

In addition to the first-quarter results, PriceSmart provided details on sales for the month of December, which includes the key holiday shopping period. The results weren't exciting, with comps coming in at just 0.3% as compared to the prior month's 3.2% boost. That dip reversed the trend toward higher sales gains we saw for both October and November, and it could make it difficult for the company to match the 5% comps growth it booked through all of 2014.

Source: PriceSmart financial filings.

Looking ahead
Management will hold a conference call discussing the quarterly results at noon on Friday, Jan. 9. At that time, investors should get updates on how big of an impact currency fluctuations were in these figures. CEO Jose Luis Laparte should also provide data on the company's expansion, particularly its aggressive move into new Colombian markets. Investors will also want to know how other countries performed this past quarter, particularly Jamaica, which was the only market to turn in negative comps for PriceSmart last year.

Finally, look for management to update investors on membership renewal rates. They have averaged a strong 84% during the prior 12 months, but still have plenty of room to rise toward Costco's stellar 90%.

The article PriceSmart, Inc. Delivers Sales Gains With Rising Costs originally appeared on Fool.com.

Demitrios Kalogeropoulos owns shares of Costco Wholesale. The Motley Fool recommends Costco Wholesale and PriceSmart. The Motley Fool owns shares of Costco Wholesale. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.