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PriceSmart, Inc. (PSMT) Q1 2024 Earnings Call Transcript

PriceSmart, Inc. (PSMT)

Q1 2024 Earnings Conference Call

Company Participants

Michael McCleary - Chief Financial Officer

Robert Price - Interim Chief Executive Officer

Conference Call Participants

Hector Maya - Scotiabank

Jon Braatz - Kansas City Capital

Presentation

Operator

Good afternoon, everyone and welcome to the PriceSmart, Inc. Earnings Release Conference Call for the First Quarter of Fiscal Year 2024 which ended on November 30, 2023. After remarks from our company's representatives, Robert Price, Interim Chief Executive Officer; and Michael McCleary, Chief Financial Officer, you will be given an opportunity to ask questions as time permits. As a reminder, this conference call is limited to one hour and is being recorded today, Wednesday, January 10, 2024.

A digital replay will be available following the conclusion of today's conference call through January 17, 2024 by dialing 1877-674-7070 for domestic callers or 1416-764-8692 for international callers and by entering the replay access code 833282 followed by # key. For opening remarks, I would like to turn the call over to PriceSmart's Chief Financial Officer, Michael McCleary. Please proceed, sir.

Michael McCleary

Thank you, operator. And welcome to PriceSmart Inc.'s earnings call for the first quarter of fiscal year 2024 which ended on November 30, 2023. We will be discussing the information that we provided in our earnings press release and our 10-Q which were both released yesterday afternoon, January 9, 2024. Also in these remarks, we refer to non-GAAP financial measures. You can find a reconciliation of our non-GAAP financial measures to the most directly comparable GAAP measures in our earnings press release and our 10-Q. These documents are available on our Investor Relations website at investors.pricesmart.com, where you can also sign up for e-mail alerts.

As a reminder, all statements made on this conference call other than statements of historical fact are forward-looking statements concerning the company's anticipated plans, revenues and related matters. Forward-looking statements include but are not limited to, statements containing the words expect, believe, plan, will, may, should, estimate and some other expressions. All forward-looking statements are based on current expectations and assumptions as of today, January 10, 2024. These statements are subject to risks and uncertainties that could cause actual results to differ materially, including the risks detailed in the company's most recent annual report on Form 10-K, the quarterly report on Form 10-Q filed yesterday and other filings with the SEC which are accessible on the SEC's website at www.sec.gov. These risks may be updated from time to time. The company undertakes no obvious to update forward-looking statements made during this call.

Now, I will turn the call over to Robert Price, PriceSmart's Interim Chief Executive Officer.

Robert Price

Thank you, Michael. I also want to express my sincere thanks and appreciation to our employees, both here in the United States and in the countries where we operate our business. Overall, I am very pleased with our sales and earnings results. I especially commend our operations and buying teams for their outstanding performance. I also want to highlight our December sales $511 million, the highest sales month in our company's history. These record sales were made possible by the coordinated efforts of our buyers, PriceSmart Club employees and our logistics team members.

Finally, I would like to congratulate our long-time team member, Paul [ph], on his recent appointment as Executive Vice President and Chief Merchandising Officer of PriceSmart. Now Michael will continue with his presentation.

Michael McCleary

Thank you, Robert. We had a strong first quarter as both total revenues and net merchandise sales exceeded $1.1 billion. Net merchandise sales increased by 10.7% or 6.8% in constant currency. And comparable net merchandise sales increased by 8% or 4.3% in constant currency. By segment, in Central America, where we had 29 clubs at quarter end, net merchandise sales increased 11.3% or 6.4% in constant currency with a 9.1% increase in comparable net merchandise sales or 4.3% [ph] in constant currency. All of our markets in Central America had positive comparable net merchandise sales growth.

Our Central America segment contributed approximately 550 basis points of positive impact to the growth in total consolidated comparable rent merchandise sales for the first quarter. This segment includes 2 new clubs following the opening of our third warehouse club in El Salvador in May 2023 and our sixth warehouse club in Guatemala in November 2023. In the Caribbean, where we had 14 clubs at quarter end, net merchandise sales increased 6.4% or 8.6% in constant currency and comparable merchandise sales increased [indiscernible] or 8.2% in constant currency. Our Caribbean region contributed approximately 180 basis points of positive impact to the growth in total consolidated comparable net merchandise sales for the quarter.

In Colombia, we had 10 clubs open at the end of our first quarter, following the opening of our El Poblado Club in Medellin on September 1. Net merchandise sales in Colombia increased 19.3% or 19.4% [ph] in constant currency and comparable net merchandise sales increased 7.1% or decreased 7.2% in constant currencies. Colombia contributed approximately 750 basis points [ph] of positive impact to the growth in total consolidated comparable net merchandise sales for the quarter. In terms of merchandise categories, when comparing our first quarter sales to the same period in the prior year, our foods category grew approximately 7%, our non-foods category increased approximately 9%, our food services and bakery categories increased approximately 7% and our health services, including optical audiology infancy [ph] increased over 600%.

Membership accounts grew 3.8% versus the prior year to 1.82 million accounts with a 12-month renewal rate of 87.4% as of the end of our first quarter. Platinum membership accounts are 9.3% of our total membership base as of November 30, 2023, an increase from 7.9% as of November 30, 2022. Membership income for the first quarter was $17.7 million, an increase of 11.7% over the same period last year.

In the first quarter of fiscal year 2024, we raised the annual membership fee for 2 cards by $5 for all membership types in most markets. We expect these fee increases to also take place in most of the remaining countries on a staggered basis during the remainder of fiscal 2024. Total gross margin from net merchandise sales increased $15.9 million or approximately 9.6% versus the same quarter of the prior fiscal year, with a slight decrease in rate from 16.2% to 16.1%, primarily from the removal of our premium and reduction of our FX premiums....

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