UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended August 31, 20202022

OR

For the transition period from ______ to

COMMISSION FILE NUMBER 000-22793

PriceSmart, Inc.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (858) 404-8800

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  No 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes  No 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  No 

The aggregate market value of the Registrant’s voting and non-voting common equity held by non-affiliates of the Registrant as of the last day of the Registrant's most recently completed second fiscal quarter was $1,308,770,913$1,822,456,943 based on the last reported sale price of $55.69$72.23 per share on the NASDAQ Global Select Market on February 29, 2020.28, 2022.

As of October 19, 2020, 30,670,64325, 2022,30,904,826 shares of Common Stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company’s definitive Proxy Statement for the Annual Meeting of Stockholders to be held on February 4, 2021 3, 2023are incorporated by reference into Part III of this Form 10-K. 

PRICESMART, INC.

ANNUAL REPORT ON FORM 10-K FOR

THE FISCAL YEAR ENDED August 31, 20202022

TABLE OF CONTENTS

Forward-Looking Statements

This annual report on Form 10-K contains forward-looking statements concerning PriceSmart, Inc.'s ("PriceSmart", the "Company" or "we") anticipated future revenues and earnings, adequacy of future cash flows, omni-channel initiatives, proposed warehouse club openings, the Company's performance relative to competitors and related matters. These forward-looking statements include, but are not limited to, statements containing the words “expect,” “believe,” “will,” “may,” “should,” “project,” “estimate,” “anticipated,” “scheduled,” “intend,” and like expressions, and the negative thereof. These statements are subject to risks and uncertainties that could cause actual results to differ materially including, but not limited to: adverse changes in economic conditions into the Company’s markets, natural disasters, compliance risks volatility in currency exchange rates, competition, consumer and small business spending patterns, political instability, increased costs associated with the integration of online commerce with our traditional business, whether the Company can successfully execute strategic initiatives, breaches of security or privacy of member or business information, cost increases from product and service providers, interruption of supply chains, COVID-19 related factors and challenges, including among others, the duration of the pandemic, the unknown long-term economic impact, the impact of government policies and restrictions that have limited access for our members, and shifts in demand away from discretionary or higher priced products to lower priced products, exposure to product liability claims and product recalls, recoverability of moneys owed to PriceSmart from governments, and other important factors detailed in this Annual Report on Form 10-K under the heading Part I. “Item 1A. Risk Factors.” Forward-looking statements are only as of the date they are made, and we do not undertake to update these statements, except as required by law. In addition, these risks are not the only risks that the Company faces. The Company could also be affected by additional factors that apply to all companies operating globally and in the U.S., as well as other risks that are not presently known to the Company or that the Company currently considers to be immaterial.

PART I

Item 1. Business

General

PriceSmart began operations in 1996 in San Diego, California. We ownexists to improve the lives and operate U.S. style membership shopping warehouse clubs in Central America, the Caribbean and Colombia. We also function as a wholesale supplier to a retailer in the Philippines. We sell high quality brand name and private label consumer products and provide services such as optical and tires at low prices to individuals and businesses. Historically, our typical warehouse buildings have ranged in sales floor size from approximately 40,000 to 60,000 square feet and are located primarily in and around the major cities in our markets to take advantage of dense populations and relatively higher levels of disposable income. Additionally, starting in fiscal year 2019, we also began opening smaller format clubs, with sales floors ranging from approximately 30,000 to 40,000 square feet. These smaller format clubs are intended to serve markets where the population is likely to support a smaller club or densely populated urban areas where it is challenging to secure sufficient real estate at a reasonable cost for a larger club. We believe this smaller format has the potential to expand our geographic reach in existing markets and provide more convenience for our members. We continue to invest in improving the in-club experience for our members, as well as in technology to increase efficiencies and to enhance the member shopping experience with omni-channel capabilities, including e-commerce online shopping. During the third quarter of fiscal 2020, the Company launched its Click & Go™ online order and curbside pickup service that provides contactless shopping in all 13businesses of our markets. We began adding delivery options to this service inMembers, our employees and our communities by reliably and consistently providing quality goods and valuable services at the fourth quarter of fiscal 2020 that were available in six of our 13 markets as of August 31, 2020 and expanded into further markets in early fiscal 2021.

As warehouse club operators, we believe that our business success depends on our ability to be the low-cost, high-quality operators in our markets and, in turn, to offer the best value on attractive products and services in our markets.lowest possible prices. We believe that lower prices on products and services drive sales volume, which increases the Company’s buying leverage, which in turn leads to better pricing that we can then offer to our members,Members, validating the value of the annual membership investment that our customers make.  In fiscal year 2020, our average net merchandise sales were approximately $1,400 per square foot of sales floor space.fee.

LogisticsPriceSmart began operations in 1996 in San Diego, California, with the intent to bring our U.S. style membership shopping warehouse club concept to emerging and developing countries. We currently operate 50 warehouse clubs in Central America, the Caribbean, and Colombia. In all 13 markets, our Members are able to engage with us on social media and shop on our e-commerce platform, PriceSmart.com.

Member experience is our top priority. We rigorously limit the number of SKU’s in order to drive volume and leverage purchasing power for the benefit of our Members. Our curated selection offers a combination of specialty items that are imported and/or unique to our markets, locally and regionally sourced goods, essential goods, direct-from-farm fresh produce and private label consumer products under the brand “Member’s Selection^®”. Our Member’s Selection^® offering allows us to maintain key quality items at lower prices and provides the opportunity to reduce supply chain risks. We also offer prepared foods and fresh-baked goods. Most merchandise is available for online ordering through PriceSmart.com and for delivery or contactless curbside pickup through our Click & Go™ service. We also offer Wellness programs such as Optical, Pharmacy and Audiology. Our clubs typically feature food courts and tire centers and services. We are also a significant provider of goods to small businesses in our markets that benefit from larger pack sizes and lower pricing. We strive to continually enhance the value of our membership such that the value of the goods and services purchased and received by the Member far exceeds the annual cost of the membership.

Our warehouse clubs range in sales floor size from approximately 30,000 to 60,000 square feet. Our larger clubs are typically located in and around densely populated major cities that include a large penetration of consumers with significant disposable income. Our smaller clubs tend to be in areas with less population density, but where there are significant opportunities to serve the population and supply and support businesses. We also have smaller format clubs in urban areas where it is difficult to secure sufficient real estate at a reasonable cost.

We strategically invest in technology to enhance Member experience and convenience. We believe technology allows us to access valuable data that supports our ability to increase efficiencies and gain important insights about our Members’ purchasing habits. We now provide digital membership and auto-renewal for the convenience of our Members.

Our logistics and distribution infrastructure is key to maximizing efficiencies. We continually review and upgrade our logistics and distribution systems in an attempt to capture efficiencies are fundamentalas our business grows in sales volume, in geography and through activity generated by e-commerce. We utilize regional distribution centers in the U.S. and Costa Rica as well as several local distribution centers to delivering high qualitydistribute merchandise at low pricesefficiently and to our members.create flexibility to mitigate the risk of supply-chain disruption. We continuealso seek to explore ways to deliver value, improve efficiency, reduce costscapture efficiencies by using specialized distribution centers for produce and ensure a flowcentralized production for categories such as bakery and meat processing.

‎

Purchasing land and constructing warehouse clubs is generally our largest ongoing capital investment. Securing land for warehouse club locations is challenging in several of our markets because suitable sites at economically feasible prices are difficult to find. We believe ownership of our real estate ownershipin many of our markets provides a number ofseveral advantages, as compared to leasing, including lower operating expenses, flexibility to expand or otherwise enhance our buildings, long-term control over the use of the property and the residualpotential increase of value that the real estate may have in future years. While our preference isAlthough we prefer to own rather than lease real estate, we have entered intosometimes lease our real estate leases in certain cases and will likely continue to do so inwhen leasing provides the future.best available opportunity.

Our warehouse clubs currently operate in emerging markets that historically have had higher growth rates and lower warehouse club market penetration than the U.S. market. In the countries in whichlocations where we operate, we do not currently face direct competition from U.S. membership warehouse club operators. However, we do face competition from various local and international retail formats such as hypermarkets, supermarkets, cash and carry outlets, hard discounters, home improvement centers, electronic retailers, specialty stores, convenience stores, traditional wholesale distribution and growing online sales.

The number of warehouse clubs in operation for each country or territory were as follows:

members, particularly restaurants and hotels, as well as sporadic supply chain challenges, which can impact inventory levels. In response, early in calendar year 2020 we identified four main priorities:

Protect the safety and well-being of our employees and our members. We remainvigilant and continue to take proactive measures to provide a safe environment for our employees and our members. We are closely tracking numerous decrees and government mandates and are following all local guidelines. We have taken preventative measures that include frequent and enhanced cleaning and sanitizing protocols, providing personal protective equipment, installing protective barriers for the cashiers and in other member-facing areas, implementing social distancing measures, metering the number of customers in a club at any one time, requiring masks to be worn by members in the club (where legally permitted), taking temperatures of employees at the beginning of shifts, quickly identifying and cooperating with local health officials about confirmed cases, promptly implementing contact tracing protocols and mapping of potentially exposed employees who are then immediately quarantined while continuing to be paid, directing employees whose functions could be performed remotely to work off site, offering vulnerable employees with underlying health conditions, employees over 60 and pregnant employees paid leave and vigilantly educating our employees about safe practices and enforcing best practices of good hygiene. We have also expanded our efforts to educate family members of employees about safe practices and to provide them with masks and sanitizing materials. We have modified our sick leave policy to make sure that sick people can take paid time off. We have built reserve teams of employees who do not overlap with each other so that they can step in as needed. In the initial months of the pandemic, we reduced or eliminated in-club food service and food sampling; however, later in the fiscal year as infection rates decreased and restrictions eased, we resumed some limited seating and capacity in-club food service in some of our markets and we have begun to reintroduce sampling incrementally using hygienic methods.

Take proactive measures to protect our supply chain. We are working closely with our suppliers to make sure that we have essential items available for our members. This includes increasing the use of our regional and local distribution centers and merchandise vendors to provide additional flexibility and reduce the risk of interruption of the flow of merchandise to our markets. We have also placed limits on the quantity of certain key items that members can purchase, such as cleaning supplies, paper products and core shelf-stable groceries. We have also activated alternative distribution systems and routing to ensure optionality in the event of outbreak or restrictions on mobility in certain geographic areas.

Expand technology-enabled shopping. During the third fiscal quarter of 2020, we launched our Click & Go™ curbside pickup service to allow for a contactless way for our members to shop. As of August 31, 2020, we offered the Click & Go™ curbside pickup service in all 13 of our markets. Early in our fourth fiscal quarter, we also added delivery to our Click & Go™ service, which was available in six of our 13 markets as of August 31, 2020 and expanded into further markets in early fiscal 2021. These services provide an alternative and convenient way for our members to shop, while reducing physical contact. Our Click & Go™ service enables members to use our e-commerce platform to identify and select merchandise, order and pay online, and then have their orders placed in their cars at their chosen clubs or delivered to their homes or place of business. We continue to work on improving and expanding our online initiatives, including order fulfillment, in conjunction with optimizing our club operations to allow members to shop safely, quickly and efficiently.

Manage cash and capital resources. Given the uncertainty surrounding the potential impact of the outbreak on our results of operations and cash flows, we are taking steps to secure and preserve available cash. Initially, we suspended most of our capital projects and discretionary spending. As we closely monitored and better understood the risks and opportunities of operating in this climate, we restarted several of our previously postponed investments. We opened our smaller format warehouse club in Liberia, Costa Rica in June 2020, and we have resumed construction on our third club in the greater metropolitan area of Bogota, the eighth in Colombia, which is expected to open in December 2020. We continue to evaluate whether and when to restart previously announced construction of future warehouse clubs on land that we acquired in Bucaramanga, Colombia and in Jamaica, as well as other capital projects. In the third quarter of fiscal 2020, we initially furloughed approximately 80 employees in the United States and implemented temporary salary reductions for employees and executives above a certain income level on a tiered basis increasing from 10% to 30% based on compensation level. Additionally, the Board of Directors waived their cash compensation for the calendar quarter ended June 30, 2020. In late fourth quarter of fiscal 2020, we ended the furloughs and discontinued the temporary salary reductions. Based on Company performance, at the end of the fourth quarter we paid a special bonus for all employees up to and including Senior Vice Presidents who had their salaries reduced. In addition, in the first quarter of fiscal year 2021, the Board approved the restoration of their compensation for the quarter for which they had previously waived it. Furthermore, we initially negotiated extended payments with our vendors, but since then we have begun to return to more normal payment term arrangements. Lastly, we have taken advantage of tax deferral arrangements where available. In the current environment, we believe cash flows from operations, our current cash position and access to capital markets will continue to be sufficient to meet our anticipated operating cash needs, which include any deferred liabilities, funding seasonal buildups in merchandise inventories and funding our capital expenditures, dividend payments and other financing requirements. Refer to Part II. “Item 7. Management’s Discussion and Analysis - Liquidity and Capital Resources” for additional information.

We expect continued uncertainty and opportunities in the economies of our markets because of the unpredictability of the duration and intensity of the COVID–19 pandemic and the length and impact of stay-at-home orders and other restrictions;

volatility in employment trends and consumer confidence; volatility in foreign currency exchange rates and commodity prices; and possible fiscal austerity measures taken by governments in our markets, which will likely impact our results in the near future.

Merchandising

Our strategyPart of our unique value proposition is to makemaking available to our membersMembers a curated selection of high quality merchandise sourced from around the world at exceptional values, by providing a curated selection of products and valuable services, with lower margins than traditional retail stores.

We offer merchandise in the following categories:

Foods & Sundries consists primarily of our grocery, cleaning supplies, health & beauty and canned foods products and constituted approximately 52% 49% of net merchandise sales for fiscal 2020.2022.

Fresh Foods consists primarily of our meat, produce, deli, seafood and poultry products and constituted approximately 29% of net merchandise sales for fiscal 2020.2022.

Hardlines consists primarily of our electronics, appliances, hardware, sporting goods, and toy products and constituted approximately 11% of net merchandise sales for fiscal 2020.2022.

Softlines consists primarily of apparel, domestics and furniture products and constituted approximately 4%6% of our net merchandise sales for fiscal 2020.2022.

Other Business consists primarily of our food service, optical,bakery, wellness (optical, pharmacy, and audiology) and tire center and other ancillary services and constituted approximately 4% 5% of net merchandise sales for fiscal 2020.2022.

Across various categories, we offer exciting and unique seasonal merchandise and rotational programs that offer unique value throughout the year.

Competitive Strengths

Low Operating Costs. Our format is designed to move merchandise from our suppliers to our membersMembers at a lower expense ratio than our competitors. We strive to achieve efficiencies in product distribution by minimizing the labor required to stock and display merchandise, limiting non-payroll operating expenses and maintaining low occupancy costs. For example, we offer a limited number of stock keeping units (SKUs) with large pack sizes, which allows us to keep shelves stocked with less labor cost than competitors that offer a greater number of SKUs. More recently, we also have opened distribution centers in certain of our high volumehigh-volume markets to improve efficiency and in-stock rate, reduce lead times on high volume products, and mitigate risks of supply chain disruption. Our focus on driving down operating costs allows us to offer better value and lower prices to our members,Members, which we believe helps generate memberMember loyalty and renewals, which in turn leads to increased sales.

Membership. Our membership model in and of itself provides a competitive advantage. Our membership represents a desirable demographic concentration with strong purchasing power in our markets. The data we can access about our membership base not only provides better connectivity with our Members, but also enables us to identify and pursue additional opportunities to provide value for our Members. Membership has been a basic operating characteristic in the warehouse club industry, beginning over 46 years ago at Price Club, the first warehouse club. We believe membership promotes Member loyalty, and membership fees contribute to our ability to operate our business on lower margins than conventional retailers and wholesalers. Membership fees were equal to approximately 1.5% of net merchandise sales and 36.1% of operating income in fiscal year 2022. Our Members can sign up for and renew their memberships online, which gives us another valuable digital touch point with them.

We continue to expand our product and services offerings to our Members. One of our primary initiatives has been the expansion of our Wellness programs, which include our Optical, Pharmacy and Audiology departments. As of August 31, 2022, we had 47 Optical locations open, with eight Pharmacy and five Audiology locations open. We expect to continue our rollout of Audiology to a majority of our clubs and markets in fiscal year 2023. In addition, we plan to increase our Pharmacy locations by expanding this service to all the clubs in our Panama market. We believe that untapped opportunities exist to further enhance the value of our membership in various areas. We continue to explore opportunities to provide our Members with products and services that are particularly attractive to our unique membership base while expanding current programs such as our co-branded credit card.

Business Members. Our product selection, larger pack sizes, and low prices appeal to both business and retail consumers. Our business Members include a broad cross section of businesses such as restaurants, institutions including schools, and other businesses that purchase products for resale or use in their operations. These business Members represent a significant source of sales and profit and provide purchasing volume that gives us better prices from our suppliers.

‎

Worldwide Sourcing. Approximately 48.2% 49% of our sales come from merchandise sourced in the U.S., Asia and Europe. One of the primary advantages we have compared to most of our competitors is our United States-based buying team that sources merchandise from suppliers in the U.S. and around the world. Our U.S.-based buyers identify and purchase new and exciting items, including our own Member’s Selection private label products. Many of these branded products are available only at PriceSmart in the markets in which we operate.

Membership. Membership has been a basic operating characteristic in the warehouse club industry beginning over 44 years ago at Price Club, the first warehouse club. Membership fees contribute to our ability to operate our business on lower margins than conventional retailers and wholesalers and represented approximately 1.7% of net merchandise sales in fiscal 2020. In addition, membership allows us to connect more closely with our members and to promote customer loyalty. Since 2019, we have offered members the ability to sign up for and renew their memberships online.

Our membership represents a desirable demographic concentration with strong purchasing power in our markets. During fiscal 2020, we continued our expansion of our Platinum Membership rewards program into additional countries in our Central America, Colombia and Caribbean segments. Similarly, we continue to expand our product and services offerings to members, including co-branded credit card benefits, optical departments and Click & Go™ shopping and other services. We believe that untapped opportunities exist to further enhance the value of our membership in various areas. We continue to explore opportunities to provide our members with products and services that are particularly attractive to our unique membership base.

Business Members. Our product selection, marketing and general business focus are directed to both business and retail consumers. Our business members include a broad cross section of businesses such as restaurants, institutions including schools, and other businesses that purchase products for resale or use in their operations. These business members represent a significant source of sales and profit and provide purchasing volume that gives us better prices from our suppliers.

Innovation. The warehouse club industry has been operating for over forty years, following the founding of Price Club in 1976. The world of merchandising has evolved during this period, particularly with respect to how technology impacts

operational efficiencies and how consumers shop. We are leveraging technological innovations we have developed expertise and are gaining more knowledge on how to use technologydeveloped to enhance our worldwide sourcing of products and make them available in our developing and emerging countries in a manner that meets current consumer preferences. We operate effectively in multiple markets, many of which are relatively small, with different legal requirements, local buying opportunities, cultural norms, unique distribution and logistical challenges and memberMember preferences that require our unique abilityus to source the correct mix of local versus imported merchandise. We believe that our future success is highly dependent on our capacity to continue to adapt and innovate to meet the needs of our current and future members. While not yetMembers. We expect to expand our omni-channel offering to include additional services such as prevalent as indrop-ship and the U.S., online sales penetration is increasing in the markets where we operate, especially ascreation of a result of the mobility restrictions imposed as a result of the COVID-19 pandemic.digital business-to-business application. We successfully launched our Click & Go™ service in the third quarter of fiscal 2020, which allows our members to order online and pickup their orders curbside at our warehouse club locations or, in six of 13 markets,also have it delivered to their home or place of business. We have also developed better in-boundinbound and outbound online communication channels, so thatand we can develop aare using data analytics to better understanding ofunderstand our members’Members’ evolving preferences.

Experienced Management Team.Team We are making investments in talent to support our technology development and other administrative functions. In January 2019,. Sherry S. Bahrambeygui was namedis PriceSmart’s Chief Executive Officer after havingOfficer. She has led several new transformational initiatives that have allowed us to retain the key benefits of our business model, while expanding capabilities that generate new ways of approaching our business, including an omni-channel platform and adoption and application of new technology and data analytics to drive growth. She has been instrumental to the evolution of the Company’s governance and other strategic initiatives for over 17the past ten years, includingfirst as a member of theour Board of Directors for the past eight years. In April 2020,and then as CEO and Board member since 2018. Michael L. McCleary was promoted tois Executive Vice President and Chief Financial Officer. Mr. McCleary joined the Company in 2003 and has over 30 years of international finance, tax and accounting experience. In addition to Ms. Bahrambeygui and Mr. McCleary, themany other members of our management team have extensive career experience in the warehouse club business.  Many of our executivesbusiness, including some who learned the warehouse club business from their time at Price Club. The executive team that joined usTheir experience and knowledge represent a key strength and competitive advantage for our company. We also have retained key executives from when we acquired Aeropost in March 2018 iswho are experienced in developing online technology and marketing for e-commerce and logisticswho have assisted us in increasing our digital interaction with Members. We continue making investments in talent to support our technology development and other administrative functions. In March 2022, John D. Hildebrandt was appointed Acting Chief Operating Officer, and in May 2022, became the Latin America marketplace. Effective September 1, 2020, Juan I. Biehl was promoted to a newly created position forChief Operating Officer of the Company,Company. He had previously served as the Company’s Executive Vice President Digital Experience– Operations since February 2010. Before that office, Mr. Hildebrandt held various management positions with the Company dating back to 1997. He initially worked overseas in the Philippines and Chief Technology Officer. Prior to this promotion Mr. Biehl servedPanama as the Chief Technology Officera country manager, then held positions of Aeropost, Inc.Vice President and was previously Senior Vice President before becoming an Executive Vice President overseeing the Company’s Caribbean and Central American operations. Mr. Hildebrandt was a Senior Operations Manager of Digital Experience at PriceSmart. Since joining PriceSmart, Mr. Biehl has overseen the creation of key technology capabilities that lead to the launch of our Click & Go™ servicePrice/Costco from 1994 through 1996 and accelerated the continued development of pricesmart.com.served in various management roles for The Price Company beginning in 1979.

Growth Strategy

Our BoardAs we look to the future, our Company is focused on three major drivers of Directors has approved a growth strategy that includes the following elements:growth:

Increasing same “store” sales.Expand Real Estate Footprint with New Clubs and Distribution Facilities

Increase Membership Value

Drive Incremental Sales via PriceSmart.com and Enhanced Online, Digital and Technological Capabilities

I.Expand Real Estate Footprint with New Clubs and Distribution Facilities. We believe that there is a number of wayscontinue to increase same store sales.seek opportunities to expand our geographic footprint for brick-and-mortar warehouse clubs. We are committed to increasing same store sales by increasing the number of member transactions and by increasing the average ticket. We also plan to expand sales floor spaceopen a warehouse club in El Salvador located in the city of San Miguel in the spring of 2023 and increase parking spaceanother club in someMedellín, Colombia in the summer of our high traffic clubs in fiscal 20212023. We continue to improve the shopping experience for our members. Additionally, we plan to continue our development and expansion of our omni-channel member experience by continuing to scale our Click & Go™ curbside and delivery service and use enhanced analytics to help us better understand our members and improve the PriceSmart experience. We believe that the use of technologies to identify member shopping patterns will help us to design targeted marketing campaigns, which will further drive sales. Additionally, we believe that continuing to enhance the member value proposition by expanding our portfolio of products and services to include more fresh foods, offering new services, such as optical and affinity programs for external services like travel and insurance, will help to drive member loyalty and overall sales. Lastly, we believe our private label has strong brand recognitionactively pursue club growth in our markets and to evaluate opportunities in new markets. Our growth strategy, as it pertains to real estate, includes physical distribution centers of various types to support the flow of merchandise from the supplier to the Member, be it sales generated from the clubs or through PriceSmart.com. Also, the need for supply chain optionality in today’s world has proven essential. Therefore, we believe that significant opportunity exists for usplan to growmake appropriate investments in our private label by extending into additional merchandise categories and enhancedistribution network to maximize efficiencies, minimize supply chain disruption, maximize the “Treasure Hunt” experience, helping to differentiate us fromefficient use of limited space in our competitors.

Adding New Warehouse Clubs in Existing Markets. We currently operate in 13 countries/territories, with the largest in terms of population and gross domestic product being Colombia. There is uncertainty surrounding the continuing potential impact of the novel coronavirus outbreak (COVID-19) on our results of operations and cash flows. Thus, we currently have announced one additional club to open in Colombia in December 2020. We will continue to monitor the impact of COVID-19 on our results of operation and cash flows throughout fiscal 2021 as we make decisions about where and when to add new warehouse clubs, and to provide optimal support for a growing e-commerce business. In addition to our distribution center in Miami, Florida, we also operate a regional distribution center in Costa Rica and are actively considering others. During fiscal 2022 we doubled our network of Produce Distribution Centers from two to four and are currently developing plans for two more. In some cases, these facilities also provide the opportunity to capture efficiencies by centralizing certain production activities, such as well as the appropriate formatsbakery, meat processing, packaging, and facilities for these new clubs.

New Markets. While we continue to focus on opportunities to expand in Colombia, a market where our membership concept has proven to be well-received and holds significant potential to grow our business, we continue to evaluate potential opportunities for future expansion into new markets in South America.

labeling.

Omni-channel Shopping and Other Services.

II.Increase Membership Value. We are currently focusingseeking to attract more Members and retain our investmentcurrent Members by expanding the benefits of being a Member of PriceSmart through sales, services, and convenience. As benefits grow and the value of being a PriceSmart Member increases, adjustments to the membership fee may be warranted. A larger membership base and higher membership fee contribute to the bottom line of the business. We focus on growth of our membership base, Member renewal rates and spend per Member as part of how we determine how Members see our value. By adding more benefits that Members can only obtain with us, we expect to see growth in digital transformationthe number of Members, which drives Membership income and omni-channel capabilities onMerchandise sales. Recent examples of enhancements we have made to the following strategic opportunities:

1. Convenience: Consumers increasingly are requesting home delivery or store pick up for larger items, as well as for their everyday basic shopping needs,value of membership include: additional services such as consumable merchandise. We intendthe ability for all of our Members to continue scaling and enhancing the efficiency of ourtransact on PriceSmart.com; Click & Go™ curbside pickup and delivery service in mostall of our clubs; and the implementation and expansion of our Well-being initiative, which offers Optical services with free eye exams for the Member and additional members of their families and deeply discounted eyeglass frames; Audiology services with free hearing exams and deeply discounted hearing aids; and Pharmacy, which provides a significant convenience to our Members. Another way we enhance Membership value is through our private label offering, “Member’s Selection®,” a brand which is available only to PriceSmart Members. We believe the Member’s Selection® brand carries goodwill and is recognized in our markets for value. Private label also provides us the opportunity to source quality items locally when appropriate. Select local sourcing has multiple benefits, including support of local communities in which we operate by enhancing business activity and creating direct and indirect jobs, mitigation of foreign currency exchange risk, and reduced supply chain exposure. These initiatives offer additional benefits and services for our Members whether they choose to shop on-line, in-club, or both. In fiscal year 2022, our private label sales penetration grew by 12%, from 22.1% of the total merchandising sales in fiscal year 2021 which includesto 24.7% in fiscal year 2022, and we plan to continue to invest in the development of additional private label products ranging from fresh groceries to large appliances.under the “Member’s Selection®” brand.

2. Smaller Club Format:  Supplementing warehouse club salesIII.Drive Incremental Sales via PriceSmart.com and Enhanced Online, Digital and Technological Capabilities. We recognize the growing expectation of consumers in our markets for convenience. As a result, we continue to improve the functionality and content of PriceSmart.com and to expand our product offerings available online. We also build and apply technological tools to continue to learn more about and strengthen our relationships with online shopping opportunities is essentialeach of our Members. Using data analytics, we believe we have been able to provide our Members with enhancements to the successmembership experience. PriceSmart.com and these tools provide the opportunity for us to continually strengthen and expand the scope of our urbanrelationship with each Member and secondary cityoffer incremental products and services in the future. Our PriceSmart.com offering provides data that informs us regarding the potential viability of new clubs in new areas and offers us options to serve and expand into new markets without the need for a traditional brick & mortar club formats. These smaller clubs may have a reduced selection of non-food products, but we plan to enable members to order online any products typically available at our larger format clubs.location. We continue to look for locations for smaller format clubs where we believe a new club will expand our geographic reach in an existing market and/or provide more convenience for our members.

3. Direct to Consumer: In fiscal 2020, we added the capability for our members to have certain large ticket products delivered directly from one of our distribution centers, warehouse clubs, or direct from our vendors. Thus, our members can order these products online and have them shipped directly to their home or business or in most cases they can also pick up their order at one of our clubs. In fiscal 2021, we will continue to increase the offerings of products that can be purchased through this channel and invest in automationtechnology to capture operational efficiencies and process improvements to reduce fulfillment costs.

4. Cross-border shopping: Usingenhance our decision-making for the sourcing expertise and buying power of PriceSmart,increasingly dynamic environment we intend to extend the range of products that our members can purchase online. For now, these new products are being sourced in the U.S., fulfilled through our Aeropost distribution center in Miami or forward deployed to regional or domestic distribution centers and shipped to our members. Members are able to receive orders at their homes or businesses and at Aeropost locations in countries where we operate clubs.

5. Additional expansion opportunities: We have begun to combine PriceSmart’s purchasing power with Aeropost’s wider geographic presence and online capabilities to sell merchandise in markets where PriceSmart does not currently have a presence. We also benefit from Aeropost’s international logistics capabilities as an alternative to deliver products to our markets, as appropriate.in.

Distribution Efficiency.Efficiency

Since our inception, we have consistently believed that distribution efficiency is fundamental for success in selling merchandise in our traditional clubs, and in today’s world, this principle holds true for purchases made online. Because PriceSmart sources merchandise from all over the world and especially in the United States, and because we are doing business in countries where infrastructure—roads and ports—is not as developed as in the United States, distribution efficiency is even more significant for us. Our ability to move products efficiently and in a timely manner from the suppliers to our membersMembers is key to the cost structure of our business and, consequentially, to how low we can price our products for our members.Members.

Historically, our international suppliers and especially our U.S. suppliers have generally shipped their products to our Miami distribution facility where they are received and assigned to various containers for direct shipment to our locations. Regional and in-country suppliers have shipped directly to our locations. As our location sales volumes have grown, we have begun to route more of our products from both international, regional and local suppliers to major regional and local distribution centers in order to improve in-stocks and reduce inventory weeks of supply and reduce expense inefficiencieslogistics costs and improvethe working capital requirements of the business, all with the goal of giving better prices to our members.Members.

In 2018,addition to our Miami distribution facility, we opened our firsthave a large regional distribution center which is located in Costa Rica within the metropolitan area of San Jose.Jose, Costa Rica. This 165,000 square foot building is designed to receive, store and ship dry, refrigerated, and frozen products to clubs in Central America. This regional distribution center has the capacity to ship products such as major appliances and online products directly to our membersMembers or to convenient pick-up locations, including our clubs. We are considering other strategic locations for distribution centers to drive efficiencies and expand omni-channel offerings.

Since the start of the COVID-19 pandemic, we have encountered numerous supply-chain challenges, including but not limited to, container shortages, port backlogs, and reduced trucking and shipping availability. Our expanded network of distribution centers has allowed for more alternative routings of shipments, increased throughput, and flexibility to be able to more effectively mitigate these challenges. Refer to Part II. “Item 7. Management’s Discussion & Analysis – Factors Affecting Our Business” for further discussion regarding these challenges and our efforts to mitigate them.

Lastly, as part of our efforts to source additional high quality and healthy fresh products, and expand on our Direct Farm Program, we opened twooperate four produce distribution centers in fiscal 2020.centers. We believe that our Direct Farm Program reduces expenses, waste and prices on items ofand allows us to offer higher quality items, while simultaneously supporting local farmers and industry. Our produce distribution centers allow us to get high-quality produce from farm-to-table quicker and more efficiency.efficiently. We expect to continue to expand this program and are developing plans to build two additional produce distribution centers as we expand intoin more of our markets.

Operating Efficiency.Efficiency

As with distribution efficiency operating efficientlyefficiency is a key tenet of our business model. We are constantly seeking to improve operating efficiencies, including investmentsby investing in technology and by centralizing back-office capabilities and facilities for processing and producing products, such as meat and bakery.

Our Membership Policy

We offer three types of memberships: Diamond, Business and Platinum.

The Diamond membershipMembership is targeted at individuals and families. The annual fee for a Diamond membershipMembership (entitling Members to two cards), in most markets is approximately $35 (entitling members to two cards)(excluding sales tax). In Colombia, we raised the Diamond membershipMembership fee has been 90,000 (COP) (including VAT) since April 2019, providingto 100,000 COP (excluding sales tax) in January 2022, yielding a converted membershipcurrent Membership price of approximately $24.

Only businesses can qualify for a Business membership. We promote Business membership through our marketing programs by offering certain merchandise targeted primarily to businesses such as restaurants, hotels, convenience stores, offices and institutions. Business members pay an annual membership fee of approximately $35 for a primary and secondary membership card and approximately $10 for additional add-on membership cards.$23.

The Company currently offers the Platinum membershipMembership program in elevenall thirteen of its thirteen markets. The annual fee for a Platinum membershipMembership in most markets is approximately $75.$75 (excluding sales tax). The Platinum membershipMembership provides membersMembers with a 2% rebate on most items, up to an annual maximum of $500. Platinum membersMembers can apply this rebate to future purchases at the warehouse club at the end of the annual membership period. The rebate is issued annually to Platinum membersMembers on March 1 and expires August 31. Any rebate amount not redeemed by August 31 is recognized as breakage revenue.

We launchedpromote our PlatinumBusiness Membership by offering certain merchandise targeted primarily to businesses such as restaurants, hotels, convenience stores, offices and institutions. In most markets, our Business Members pay an annual membership in Nicaragua in October 2020,fee of approximately $35 for a primary and we expect to expand Platinumsecondary membership to our one remaining market in fiscal 2021.card and approximately $10 for additional add-on membership cards. Only businesses can qualify for a Business Membership.

Members can now sign-up and renew their memberships as well as opt for auto-renewal online.

We recognize membership income over the 12-month term of the membership. Deferred membership income was $23.1$28.0 million and $24.9$26.0 million as of August 31, 20202022 and August 31, 2019,2021, respectively. Our membership agreements provide that if our membersMembers cancel their membership in the first 60 days, they will receive a full refund. After the initial 60 day period, membersMembers may receive a refund for the prorated share of their remaining membership fee if they so request.

Our Intellectual Property Rights

It is our policy to obtain appropriate proprietaryintellectual property rights protection for trademarks by filing applications for registration of eligible trademarks with the U.S. Patent and Trademark Office and in certain foreign countries. We also rely on copyright and trade secret laws to protect our proprietary rights. We attempt to protect our trade secrets and other proprietary information through agreements with our employees, consultants and suppliers and other similar measures. There can be no assurance, however, that we will be successful in protecting our proprietary rights. While management believeswe believe that our trademarks, copyrights and other proprietary know how have significant value, changing technology and the competitive marketplace make our future success dependent principally upon our employees’ technical competence and creative skills for continuing innovation.

Our Competition

Our international merchandising business competes with a wide range of international, regional, national and local retailers, and traditional wholesale distributors. We compete in a variety of ways, including the prices at which we sell our merchandise, merchandise selection and availability, services offered to customers, location, store hours and the shopping convenience and overall shopping experience we offer. We also prioritize above all the safety of our Members and our employees. Some of our competitors may have greater resources, buying power and name recognition. In the countries in which we operate, we do not currently face direct competition from U.S. membership warehouse club operators. However, we do face competition from various retail formats such as hypermarkets, supermarkets, convenience stores, cash and carry outlets, home improvement centers, electronic retailers and specialty stores, including those within Latin America that are owned and operated by large U.S. and international retailers, including Walmart, Inc. in Central America and Grupo Éxito and Cencosud in Colombia. We have competed effectively in our markets in the past and expect to continue to do so in the future due to the unique nature of the membership warehouse club format. We have noted that certain retailers within our markets are making investments in upgrading their locations and/or experimenting with different formats. These actions may result in increased competition within our markets. Further, it is possible that additional U.S. warehouse club operators may decide to enter our markets and compete more directly with us in a similar warehouse club format. We also face competition from online retailers, such as Amazon.com, Inc. in Colombia, and last-mile delivery services that serve our markets, and we expect that this type of competition will grow and intensify in the future.

Our EmployeesHuman Capital

As of August 31, 2020,2022, we had approximately 9,50010,600 employees. Approximately 93%96% of our employees were employed outside of the United States, and unions represent approximately 1,500 employees.about 1,800 employees were represented by labor unions.

Developing a Diverse Workforce Representative of Our policyMarkets

Fundamental to our mission is the ability to provide employees with good wages relative toattract, retain, and develop a diverse workforce representative of the competition in the markets in which they work and to provide a safe working environment and good benefits which often exceed the legal requirements for countries in which we dooperate. We are proud to hire from the local communities where we operate, which then enhances our understanding of the legislation and operating environment of each country so we can better serve our Members. We provide our employees with competitive wages above minimum wage in each region, as well as comprehensive benefit programs, which generally include life and health insurance and post-employment savings plans. We also seek to identify opportunities to support local businesses and communities, with the goal of improving the quality of life in the countries where we operate.

Talent Development

We believe our investment in the education, training and development of our employees contributes to the overall success of our business. We believe that investinga focus on talent development leads to long-serving, loyal employees, which improves efficiencies in operations, thus resulting in higher quality service to our Members. We provide learning opportunities for our employees through various training courses including instructor-led internal and external programs. We also seek to promote from within, allowing us to develop the leadership strengths of our employees to provide a better overall customer experience for our Members.

Health and Safety

The COVID-19 pandemic brought unprecedented challenges to our business, communities, Members and employees. During the initial period of the pandemic, we prioritized the safety and well-being of our employees and Members by following applicable local and national government regulations at each of our warehouse clubs, offices, and distribution center locations. We implemented enhanced cleaning and sanitizing protocols and provided personal protective equipment to our employees, conducted contact tracing, preventative quarantining and implemented paid leave. We reinforced the education of our employees on safety, best practices of good hygiene, as well the encouraging to our employees to receive vaccinations as they became available. We had reserve teams of employees who did not overlap with each other so that they might step in as needed allowing those who were sick to take time off. We also had provided employee transportation and meals to offer them a safe and reliable means to work. As the pandemic has evolved, we began pulling back on many of these activities. However, we will continue to monitor the evolution of the pandemic and related workforce trends, best practices and government regulations.

growth and well-being of our employees, treating them as partners in our business and providing opportunities for career advancement lead to long-serving, loyal employees, which in turn creates efficiencies in operations and results in better service to our members. We consider our employee relations to be very good.

Seasonality and Quarterly Fluctuations

Historically, our merchandising businesses have experienced holiday retail seasonality in their markets. In addition to seasonal fluctuations, our operating results fluctuate quarter-to-quarter as a result of economic and political events in markets that we serve, the timing of holidays, weather, the timing of shipments, product mix and currency effects on the cost of U.S.-sourced products which may make these products more or less expensive in local currencies and therefore more or less affordable. Because of such fluctuations, the results of operations of any quarter are not indicative of the results that may be achieved for a full fiscal year or any future quarter. In addition, there can be no assurance that our future results will be consistent with past results or the projections of securities analysts.

Other Information

PriceSmart, Inc. was incorporated in the State of Delaware in 1994. Our principal executive offices are located at 9740 Scranton Road, San Diego, California 92121. Our telephone number is (858) 404-8800. Our website home page on the Internet is www.pricesmart.com. We make our website content available for information purposes only. It should not be relied upon for investment purposes, nor is it incorporated by reference into this Form 10-K.

Available Information

The PriceSmart, Inc. investor relations website or internet address is https://investors.pricesmart.com. On this website we make available, free of charge, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, and the annual report to the stockholders as soon as reasonably practicable after electronically filing such material with or furnishing it to the U.S. Securities and Exchange Commission (SEC). Our SEC reports can be accessed through the investor relations section of our website under “SEC Filings.” Additionally, the SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov. We will make available our annual report on Form 10-K and our annual Proxy Statement for the fiscal year 20202022 at the internet address http://materials.proxyvote.com/741511 as soon as reasonably practicable after electronically filing such material with or furnishing it to the SEC.

Item 1A. Risk Factors

In evaluating the Company’s business, you should consider the following discussion of risk factors, in addition to other information contained in this report and in the Company’s other public filings with the U.S. Securities and Exchange Commission. Any such risks could materially and adversely affect our business, financial condition, results of operations, cash flow, financial condition, liquidity and prospects. However, the risks described below are not the only risks facing us. Our business operations could also be affected by additional factors that apply to all companies operating in the U.S. and globally. Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially and adversely affect our business, financial condition, results of operations, cash flow and prospects.

External Factors that Could Adversely Affect Us

The ongoing global novel coronavirus COVID-19 pandemic had and may continue to have an adverse effect our business, results of operations, financial condition, and liquidity.

The ongoing COVID-19 pandemic has negatively impacted the world economy, caused widespread unemployment, significantly impacted global supply chains, and disrupted financial markets, all of which have negatively affected, and continue to create challenges in our markets. In addition to measures, we have takentook voluntarily, the government authorities in our markets have taken actions to mitigate the spread of COVID-19, including travel restrictions, border closings, restrictions on public gatherings, stay-at-home orders and other quarantine and isolation measures. They also have imposed business limitations such as mandatory temporary closures, required reduced operating hours, restrictions on segments of the population permitted to shop on particular days, customer occupancy limits and restrictions on sales of “non-essential” merchandise. Many of these policies and restrictions have resulted in limiting access for our membersMembers and have adversely impacted our club operations. While all the limitations have been lifted in our markets, they could be re-imposed in the event of a resurgence of infections or if future mutations, variants or related strains of the virus become prevalent.

Our business depends heavily on the uninterrupted operation of our distribution facilities located in Miami, Florida and San Jose, Costa Rica, our warehouse clubs located in Colombia, Central America and the Caribbean, and our headquarters and buying operations in San Diego, California. The operation of all of our facilities is highly dependent on our employees who staff these locations, and the coronavirus could directly threaten the health of our employees. Additionally, in an effort to protect our employees, we have trained our in-club and distribution center employees about and enforced social distancing, and we have

during this time shifted substantially allthe pandemic, most of our work force at our San Diego headquarters, our management and administrative personnel in Miami, and office support personnelemployees who could do so worked remotely. However, we are currently in the countries where we operateprocess of implementing a return to remote work.office plan, whereby employees work part of the week from home and the other part from a Company office. Management believes this hybrid approach allows for the continued safety of our workforce while also having the benefit of maintaining an engaging work environment and work life balance. Managing through this transition back to the office will be important to the continued success of our Company. Finally, we continue to identify alternative distribution channels in the case of closure of one or more of our distribution facilities or upstream and downstream disruption to our supply chain. Events such as these complicate and/or threaten the way we execute and the performance of our business and could have a material adverse effect or our business and operating results.

Operating during the COVID-19 pandemic has increased our costs of operations. Among other things, we provideprovided personal protective equipment to our employees, have employed additional cleaning and sanitizing procedures at our warehouse clubs and distribution facilities and provide transportation to employees in areas where public transportation is not currently available or is considered unsafe. We also have implemented robust protocols for screening, contact tracing, mapping and quarantining as preventative and mitigating measures. We also have additional payroll expenses associated with maintaining reserve teams of employees who remain ready if necessary to replace employees who become sick or who are required to quarantine and for employees who are in high risk groups or who are subject to quarantine. We believe these costs will continue as long asfacilities. As the pandemic is ongoing.has evolved and COVID-19 restrictions have decreased, we believe we will still incur some costs depending on future outbreaks or resurgences.

In addition, as a result of COVID-19 and the measures designed to contain the spread of the virus, we have faced and may continue toagain face delays or difficulty sourcing products, which could negatively affect our business and financial results. Certain of our suppliers have had their manufacturing operations disrupted by the coronavirus outbreak, and even where goods have been completed, they havehad been subject to weeks-long shipping delays. If our third-party suppliers’ operations continue to beare curtailed, again, or transportation systems continue to beare disrupted, we may need to seek alternate sources of supply, which may be more expensive. The duration and degree of production and supply chain disruption, and related financial impact, cannot be estimated at this time. ShouldIf the production and distribution closures continue or increasewere to resume for an extended period of time, the impact on our supply chain could have a material adverse effect on our results of operations and cash flows.

Negative economic conditions created or exacerbated by the recent outbreak of the novel coronavirus (COVID-19)COVID-19, higher interest rates and inflation could adversely impact our business in various respects.respects.

A slowdown in the economies of one or more of the countries in which we operate or adverse changes in economic conditions affecting discretionary consumer spending could adversely affect consumer demand for the products we sell, change the mix of products we sell to a mix with a lower average gross margin, cause a slowdown in discretionary purchases of goods, adversely affect our net sales and result in slower inventory turnover and greater markdowns of inventory, or otherwise materially adversely affect our operating results. Any prolonged outbreak of the coronavirus could result in the imposition of quarantines or closures of retailer locations, office spaces, manufacturing facilities, travel and transportation restrictions and/or import and export restrictions, any of which could contribute to a general slowdown in the global economy and the economies of the markets in which we operate. Increasing interest rates, inflation, higher fuel prices and other factors also could adversely affect the economies of the countries where we operate. A significant decline in the economies of the countries in which our warehouse clubs are located may lead to decreased sales and profitability, increased governmental ownership or regulation of the economy, higher interest rates and increased barriers to entry such as higher tariffs and taxes. The economic factors that affect our operations also may adversely affect the operations of our suppliers, which can result in an increase in the cost to us of the goods we sell to our customersMembers or, in more extreme cases, in certain suppliers not producing goods in the volume typically available for sale to us.

The economic factors that affect our operations may also adversely affect the operations of our suppliers, which can result in an increase in the cost to us of the goods we sell to our customers or, in more extreme cases, in certain suppliers not producing goods in the volume typically available to us for sale.

Employment laws and regulations in the countries in which we operate may limit our ability to effect a reduction in force to reduce our labor expenses in line with declining revenues. In some of the countries in which we operate, before we could effect a reduction in force, we would need to negotiate with labor unions, demonstrate evidence of hardship or force majeure or obtain prior government approval, which may not be given in a timely manner or at all.

Our financial performance is dependent on international operations, which exposes us to various risks.

Our international operations account for nearly all of our total revenues. Our financial performance is subject to risks inherent in operating and expanding our international membership warehouse club business, which include:

changes in, and inconsistent enforcement of, laws and regulations, including those related to tariffs and taxes;

the imposition of foreign and domestic governmental controls, including expropriation risks;

natural disasters;

trade restrictions, including import-export quotas and general restrictions on importation;

difficulty and costs associated with international sales and the administration of an international merchandising business;

crime and security concerns, which can adversely affect the economies of the countries in which we operate and which require us to incur additional costs to provide additional security at our warehouse clubs;

political instability, such as the protests and civil unrest in Colombia in 2022 and 2021, in Honduras and Nicaragua in 2019, and a general strike in Costa Rica led by public-sector unions that disrupted normal commerce in September 2018;

product registration, permitting and regulatory compliance;

volatility in foreign currency exchange rates;

general economic and business conditions; and

interruption of our supply chain.

These risks may result in disruption to our sales, banking transactions, operations and merchandise shipments, any of which could have a material adverse effect on our business and results of operations.

In 2018, U.S. legislation was approved to restrict U.S. aid to Nicaragua. In 2019, Political and other factors in each of our markets may have significant effects on our business. For example, the U.S. State Department has announced varying strategies regarding if, when and how it would authorize disbursement of foreign aid, that had been previously approved by the U.S. Congress, to Guatemala, Honduras and El Salvador. In 2020, the U.S. State Department informed the U.S. Congresscivil unrest in Colombia paralyzed significant portions of the Administration’s intentcountry’s infrastructure as roadblocks and riots disrupted normal economic activity during the third quarter of fiscal 2021. Austerity and tax reform measures for Colombia and other Latin American countries with high national debt levels and income disparity pose a risk for political instability. Similar unrest happened in Nicaragua and Honduras in 2019, respectively; Costa Rica also had a general strike against tax reform measures that significantly impeded regular economic activity in 2018. Events of this sort have, and may continue to continue additional targeted U.S. foreign assistance for Guatemala, Honduras, and El Salvador. Changes in U.S. policies regarding financial assistance could cause political or financial instability in the countries we serve.have, an adverse effect on our business.

We face significant competition.

Our international warehouse club business competes with exporters, importers, wholesalers, local retailers and trading companies in various international markets. Some of our competitors have greater resources, buying power and name recognition than we have. We also face competition from online retailers who serve our markets, and we expect that this type of competition will grow and intensify in the future.

In the countries in which we operate, we do not currently face direct competition from U.S. membership warehouse club operators. However, we do face competition from various retail formats such as hypermarkets, supermarkets, cash and carry outlets, home improvement centers, electronic retailers and specialty stores, including those within Latin America that are owned and operated by large U.S. and international retailers, including Walmart Inc. in Central America and Grupo Éxito and Cencosud in Colombia. We have noted that certain retailers are making investments in upgrading their locations which may result in increased competition. Further, it is possible that current U.S. warehouse club operators may decide to enter our markets and compete more directly with us in a similar warehouse club format. Our ability to operate profitably in our markets, particularly small markets, may be adversely affected by the existence or entry of competing warehouse clubs or discount retailers.

We compete in a variety of ways, including the value and prices at which we sell our merchandise, merchandise selection and availability, services offered to members,Members, location, store hours, safety protocols and the shopping convenience and overall shopping experience we offer. We may be required to implement price reductions to remain competitive if any of our competitors reduce prices in any of our markets. In response to the increasing threat associated with online retailers, we are making technology investments, which may result in increases in the use of cash and reduced profitability in the near term.

‎

Our sales could be adversely affected if one or more major international online retailers were to enter our markets or if other competitors were to offer a superior online experience.

Although online sales are currently a smaller proportion of total sales in our markets for the types of merchandise we offer than in the U.S., online shopping is becoming more prevalent in our markets as we and our competitors begin to offer more opportunities for online shopping and as delivery systems in our markets improve. COVID-19 has accelerated the growth of online sales in our markets due to government-imposed restrictions on shopping and changes in consumer preferences. While major international online retailers have not established a significant penetration in any of our markets yet, Amazon.com, Inc. continues to expand its online marketplace and make additional investments to bolster its presence in the countries where we

operate. Also, it is possible that Amazon.com, Inc. or smaller regional companies will increase the penetration of online shopping in our markets, especially given the importance of e-commerce during the COVID-19 pandemic.

We continue to invest in our websites and systems with the long-term objective of offering our membersMembers a seamless omnichannel experience. We currently offer our Click & Go™ online shopping, which includes both curbside pickup and delivery. Curbside pickup isdelivery are available in all markets and delivery was available in six markets as of end of fiscal year 2020 and we have expanded into further markets in early fiscal 2021.markets. Operating an e-commerce platform and fulfilment of online orders is a complex undertaking, and there is no guarantee that the resources we have applied to this effort will result in increased revenues or improved operating performance. If we do not maintain a successful and relevant omnichannelomni-channel experience for our members,Members, our ability to compete and our results of operations could be adversely affected.

We are exposed to significant weather events and other natural disaster risks that might not be adequately compensated by insurance.insurance, and we are susceptible to the long-term impacts of climate change.

Our operations are subject to volatile weather conditions and natural disasters, such as earthquakes, hurricanes and volcanic activity, which are encountered periodically in the regions in which our warehouse clubs and other facilities are located. Natural disasters could result in many daysphysical damage to, or the complete loss of, lost sales atone or more of our warehouseproperties, the closure of one or more clubs or adversely affectdistribution centers, limitations on store or club operating hours, the lack of an adequate work force in a market, the inability of customers and employees to reach our distribution chain.clubs, the unavailability of our digital platforms to our customers, disruption in the supply of products or increases in the costs of procuring products. For example, in early fiscal year 2018, operations at our USVI warehouse club were adversely affected by Hurricanes Irma and Maria. The warehouse club was closed for nine days, and after re-opening, the warehouse club operated with limited hours for 16 days due to a government-imposed curfew. Damaged and destroyed roads restricted traffic flow, adversely affecting customer access for some time after the hurricane. Future losses from business interruption may not be adequately compensated by insurance and could have a material adverse effect on our business, financial condition, and results of operations.

Furthermore, the long-term impacts of climate change, whether involving physical risks (such as extreme weather conditions, drought, or rising sea levels) or transition risks (such as regulatory or technology changes) are expected to be widespread and unpredictable. Physical risks include extreme storms that damage or destroy our buildings and inventory or interrupt our business operations and supply chain and temperature changes that increase the heating and cooling costs at clubs and distribution and fulfillment centers. We also may experience changes in energy and commodity prices driven by climate change as well as new regulatory requirements resulting in higher compliance risk and operational costs.

We face difficulties in the shipment of, and risks inherent in the importation of, merchandise to our warehouse clubs.

Our warehouse clubs typically import nearly half or more of the merchandise that they sell. This merchandise originates from various countries and is transported over long distances, over water and over land, which results in:

substantial lead times needed between the procurement and delivery of product, thus complicating merchandising and inventory controls;

the possible loss of product due to theft or potential damage to, or destruction of, ships or containers delivering goods;

product markdowns due to the prohibitive cost of returning merchandise upon importation;

product registration, tariffs, customs and shipping regulation issues in the locations we ship to and from;

ocean freight and duty costs; and

possible governmental restrictions on the importation of merchandise.

Civil unrest in certain countries in which we operate may adversely affect the flow of goods through those countries. For example, in September 2018,April 2021, protestors in Costa Rica blockedColombia erected roadblocks inside and between major highways aroundcities and damaged public transport, businesses and state buildings, which disrupted the countrynormal flow of goods and impeded access to Costa Rica’s main commerce ports and fuel distribution sites.economic activity. In 2019, political and civil unrest in Honduras and Nicaragua resulted in roadblocks in many portions of these countries. Any restriction in the movement of goods through Costa Rica’s ports or over Honduras and Nicaragua’s highways could impair our ability to supply warehouse clubs not just in those countries, but in countries throughout the region as well.

Moreover, each country in which we operate has different governmental rules and regulations regarding the importation of foreign products. Changes to the rules and regulations governing the importation ofmerchandise may result in additional delays, costs or barriers in our deliveries of products to our warehouse clubs or may affect the type of products we select to import. In addition, only a limited number of transportation companies service our regions. The inability or failure of one or more key transportation companies to provide transportation services to us, any collusion among the transportation companies regarding shipping prices or terms, changes in the regulations that govern shipping tariffs or the importation of products, or any other disruption to our ability to import our merchandise could have a material adverse effect on our business and results of operations.

We are subject to payment related risks, including risks to the security of payment card information.

WeWe accept payments using an increasing variety of methods, including cash, checks, wire transfers, our co-branded credit cards and a variety of other credit and debit cards. Our operations, like those of most retailers, requires the transmission of information permittingassociated with cashless payments. As we offer new payment options to our members,Members, we may be subject to additional rules, regulations and compliance requirements, along with the risk of higher fraud losses. For certain payment methods, we pay interchange and other related card acceptance fees, along with additional transaction processing fees. We rely on third parties to provide secure and reliable payment transaction processing services, including the processing of credit and debit cards, and our

co-branded credit cards, and it could disrupt our business if these companies become unwilling or unable to provide these services to us. We are also subject to payment card association and network operating rules, including data security rules, certification requirements and rules governing electronic funds transfers, which could change over time. If we fail to comply with these rules or transaction processing requirements, we may not be able to accept certain payment methods. In addition, if our internal systems are breached or compromised, we may be liable for banks’ compromised card re-issuance costs, we may be subject to fines and higher transaction fees and lose our ability to accept credit and/or debit card payments from our members,Members, and our business and operating results could be adversely affected. Failures or disruptions in data communication and transfer services also could significantly impact our ability to transact payments to vendors and process credit and debit card transactions. Lastly, we or our customers may experience “spoofing” transactions, particularly with respect to wire transfers, which could cause us to make payments to impostor vendors or result in our not receiving timely payment from customers for merchandise we have sold.sold.

We face the possibility of operational interruptions related to union work stoppages.

We currently have labor unions in three of our subsidiaries (Trinidad, Barbados and Panama). A work stoppage or other limitation on operations from union or other labor-related matters could occur for any number of reasons, including as a result of disputes under existing collective bargaining agreements with labor unions or in connection with negotiation of new collective bargaining agreements. A lengthy work stoppage or significant limitation on operations could have a substantial adverse effect on our financial condition and results of operations.operation.

Risks Associated with Our Business Strategy and Operations

Any failure by us to manage our widely dispersed operations could adversely affect our business.

As of August 31, 2020,2022, we had 4650 warehouse clubs in operation, located in 12 countries and one U.S. territory (eight(nine in Colombia, eight in Costa Rica;Rica and seven each in Colombia and Panama; five in the Dominican Republic and Guatemala, four in Trinidad and Guatemala;Trinidad; three in Honduras; two each in El Salvador, Jamaica and Nicaragua; and one each in Aruba, Barbados, Jamaica and the United States Virgin Islands), and we expect to open one new club in Colombia in December 2020.. We will need to continually evaluate the adequacy of our existing infrastructure, systems and procedures, financial controls, operating controls, inventory, and safety controls and make upgrades from time to time. Moreover, we will be required to continually analyze the sufficiency of our inventory distribution channels and systems and may require additional or expanded facilities in order to support our operations. We may not adequately anticipate all the changing demands that will be imposed on these systems. Any failure of our systems or our inability to effectively update our internal systems or procedures as required could have a material adverse effect on our business, financial condition and results of operations.

We might not identify in a timely manner or effectively respond to changes in consumer preferences for merchandise, which could adversely affect our relationship with members,Members, demand for our products and market share.

Our success depends, in part, on our ability to identify and respond to trends in demographics and changes in consumer preferences for merchandise. It is difficult to consistently and successfully predict the products and services our membersMembers will demand. Failure to timely identify or respond effectively to changing consumer tastes, preferences or spending patterns could adversely affect our relationship with our members,Members, the demand for our products and our market share. If we are not successful at predicting sales trends and adjusting purchases accordingly, we might have too much or too little inventory of certain products. If we buy too much of a product, we might be required to reduce prices or otherwise liquidate the excess inventory, which could have an adverse effect on margins (net sales less merchandise costs) and operating income. If we do not have sufficient quantities of a popular product, we might lose sales and profits we otherwise could have made.

Future sales growth depends, in part, on our ability to successfully open new warehouse clubs in our existing and new markets.

Sales growth at the existing warehouse clubs can be impacted by, among other things, the physical limitations of the warehouse clubs, which restrict the amount of merchandise that can be safely stored and displayed in the warehouse clubs and the number of membersMembers that can be accommodated during business hours. As a result, sales growth will depend, in part, upon our acquiring suitable sites for additional warehouse clubs. Land for purchase or lease, or buildings to be leased, in the size and locations in those markets that would be suitable for new PriceSmart warehouse clubs may be limited in number or not be available or financially feasible. In this regard, we compete with other retailers and businesses for suitable locations. Additionally, local land use, environmental and other regulations restricting the construction and operation of our warehouse clubs may impact our ability to find suitable locations, and increase the cost of constructing, leasing and operating our warehouse clubs. We have experienced these limitations in Colombia and in some of our other existing markets, which has negatively affected our growth rates in those markets. Limitations on the availability of appropriate sites for new warehouse clubs in the areas targeted by us could have a material adverse effect on the future growth of PriceSmart.

In some cases, we have more than one warehouse club in a single metropolitan area, and we may open new warehouse clubs in certain areas where we already have warehouse clubs. A new warehouse club in an area already served by existing warehouse clubs may draw membersMembers away from existing warehouse clubs and adversely affect comparable store sales performance. We experienced this adverse effect on comparable sales for existing warehouse clubs recently within our Panamanian and Guatemalan markets when we opened new warehouse clubs in each of these markets in areas that already had an existing warehouse club.

We operate in relatively small markets. Given the growth of our sales over the past few years, market saturation could impact the rate of future sales growth.

We might open warehouse clubs in new markets in the future. The risks associated with entering a new market include potential difficulties in attracting membersMembers due to a lack of familiarity with us and our lack of familiarity with local memberMember preferences. In addition, entry into new markets may bring us into competition with new competitors or with existing competitors with a large, established market presence. As a result, our new warehouse clubs might not be successful in new markets.

Failure to grow our e-commerce business through the efficient integration of physical and digital retail channels and the investments we are making to develop a robust e-commerce platform that also supports and enhances brick and mortar sales and services could materially adversely affect our market position, net sales and/or financial performance.

The retail business is quickly evolving, and consumers are increasingly embracing shopping online and through mobile commerce applications. As a result, the portion of total consumer expenditures with all retailers and wholesale clubs occurring online and through mobile commerce applications is increasing and the pace of this increase could accelerate. As demonstrated by our recent acquisition of Aeropost, launch of our Click & Go™ curbside pickup and delivery service, and other ongoing investments, we are increasing our investments in e-commerce, technology and other customer initiatives. The success of our e-commerce initiative continues to depend in large measure on our ability to build and deliver a seamless shopping experience across the physical and digital retail channels. If we fail to successfully implement our e-commerce initiative, our market position, net sales and financial performance could be adversely affected. In addition, a greater concentration of e-commerce sales could result in a reduction in the amount of traffic in our warehouse clubs, which would, in turn, reduce the opportunities for cross-club sales of merchandise that such traffic creates and could reduce our sales within our clubs, and materially adversely affectaffecting the financial performance of the physical retail side of our operations. In addition, our investmentinvestments in e-commerce and technology initiatives will adversely impact our short-term financial performance, and couldour failure to realize the benefits of these investments may adversely impact our financial performance over the longer term.

Our profitability is vulnerable to cost increases.

Future increases in costs, such as the cost of merchandise, wage and benefits costs, shipping rates, freight costs, fuel costs, utilities and other store occupancy costs, may reduce our profitability. We seek to adjust our product sales pricing, operate more efficiently, and increase our comparable store net sales to offset inflation, currency rate changes, changes in tax rates or in the methods used to calculate or collect taxes on our sales or income inflation and other factors that can increase costs. We might not be able to adjust prices, operate more efficiently or increase our comparable store net sales in the future to a great enough extent to offset increased costs. In the first half of fiscal 2020,year 2022, we launchedexperienced significant increases in freight costs for our Click & Go™ service, including curbside pickupmerchandise sourced overseas due to the global shortage of shipping containers and delivery. This service, together with our planned omnichannel services, introduces additional fulfillment and technology costs. Any failure by us to achieve the appropriate scale or realize cost efficiencies or price increases to offset these costs may reduce future profitability.supply chain disruptions. Please see Part II. “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this Form 10-K for further discussion of the effect of currency rate changes, inflation and other economic factors on our operations.

We are subject to risks associated with our dependence on third-party suppliers and service providers, and we have no assurances of continued supply, pricing or access to new merchandise.

We have important ongoing relationships with various third-party suppliers of services and merchandise. These include, but are not limited to, local, regional, and international merchandise suppliers, information technology suppliers, equipment suppliers, financial institutions, credit card issuers and processors, and lessors. Significant changes in the relationships or the agreements that govern the terms through which business is conducted could have a material adverse effect on our business, financial condition and results of operations. We have no assurances of continued supply, pricing or access to new merchandise, and any supplier could at any time change the terms upon which it sells to us or discontinue selling to us. One of our significant suppliers operates a warehouse club business and may in the future seek to compete with us in some of our markets. In addition, the manner in which we acquire merchandise, either directly from the supplier’s parent company or through a local subsidiary or distributor, is subject to change from time to time based on changes initiated by the supplier and for reasons beyond our control. Significant changes or disruptions in how we acquire merchandise from these suppliers could negatively affect our access to such

merchandise, as well as the cost of merchandise to us and hence our members,Members, which could have a material adverse effect on our business and results of operations.

Our failure to maintain our brand and reputation could adversely affect our results of operations.

Our success depends on our ability to continue to preserve and enhance our brand and reputation. Damage to the PriceSmart brand could adversely impact merchandise club sales, diminish memberMember trust, reduce memberMember renewal rates and impair our ability to add new members.Members. A failure to maintain and enhance our reputation also could lead to loss of new opportunities or employee retention and recruiting difficulties. Negative incidents, such as a data breach or product recall, can quickly erode trust and confidence, particularly if they result in adverse mainstream publicity, governmental investigations or litigation. In particular, the propagation of negative publicity on social media, whether merited or not, can have a damaging effect on our business in one or more markets. In addition, we sell many products under our private label Member’s Selection brand. If we do not maintain consistent product quality of our Member’s Selection products, which generally carry higher margins than national brand products carried in our warehouse clubs, our net warehouse sales and gross margin results could be adversely affected and memberMember loyalty could be harmed.

We face the risk of exposure to product liability claims, a product recall and adverse publicity.

If our merchandise, such as food and prepared food products for human consumption, drugs,medication, children's products, pet products and durable goods, do not meet or are perceived not to meet applicable safety standards or our members’Members’ expectations regarding safety, we could experience lost sales, increased costs, litigation or reputational harm. The sale of these items exposes us to the risk of product liability claims, a product recall and adverse publicity. We may inadvertently redistribute food products or prepare food products that are contaminated, which may result in illness, injury or death if the contaminants are not eliminated by processing at the food service or consumer level. As we begin toWe package and market fresh produce products within our markets, so we may be exposed to additional risk of product liability and adverse publicity if those fresh food products are contaminated, which may result in illness, injury or death if the contaminants are not eliminated by processing at our packaging service centers.

We generally seek contractual indemnification and proof of insurance from our major suppliers and carry product liability insurance for all products we sell to or package for our members.Members. However, if we do not have adequate insurance or contractual indemnification available, product liability claims relating to products that are contaminated or otherwise harmful could have a material adverse effect on our ability to successfully market our products and on our financial condition and results of operations. In addition, even if a product liability claim is not successful or is not fully pursued, the negative publicity surrounding a product recall or any assertion that our products caused illness or injury could have a material adverse effect on our reputation with existing and potential membersMembers and on our business, financial condition and results of operations.

We rely extensively on computer systems to process transactions, summarize results and manage our business. Failure to adequately maintain our systems and disruptions in our systems could harm our business and adversely affect our results of operations.

Given the high number of individual transactions we have each year, we seek to maintain uninterrupted operation of our business-critical computer systems. Our computer systems, including back-up systems, are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, internal or external security breaches, catastrophic events such as fires, earthquakes, tornadoes and hurricanes, and errors by our employees. Our information systems are not fully redundant, and our disaster recovery planning cannot account for all eventualities. If our computer systems and back-up systems are damaged or cease to function properly, we may have to make significant investments to fix or replace them, and we may suffer interruptions in our operations in the interim. Any material interruption in our computer systems could have a material adverse effect on our business or results of operations.

We depend on third-party service providers to support transaction and payment processing, data security and other technology services. Any interruption in the operations of these service providers could, in turn, have a material adverse effect on us. For example, in 2022, a third party that supported our point-of-sale system became insolvent, which required us to quickly develop and implement short-term workarounds and delayed our migration to a cloud-based system integrating in-store and online functionality.

From time to time, we make technology investments to improve or replace our information processes and systems that are key to managing our business. The risk of system disruption is increased when system changes are undertaken. Targeting the wrong opportunities, failing to make the right investments, or making an investment commitment significantly above or below our needs could result in the loss of our competitive position and adversely impact our financial condition and results of operations. Additionally, the potential problems and interruptions associated with implementing technology initiatives could disrupt or reduce the efficiency of our operations in the short term. These initiatives might not provide the anticipated benefits or may provide them on a delayed schedule or at a higher cost.

In 2017,Several years ago, we began evaluating options to replace our existing Enterprise Resource Planning (ERP) system. However, due to the rapidly evolving retail landscape and technological resources, as well as our acquisition of Aeropost and the expertise that came with it, we have delayedintentionally deferred this project as originally contemplated in order to more holistically assess our overall IT landscape and strategy. Subsequent to that assessment, we will reconsider the need, timing, scope and approach to our ERP replacement project. Not updating our systems on a timely basis could leave us at a disadvantage with respectrelative to operational capabilities of

our competitors. Our current ERP system is not supported by the developer of the software, which could increase the risk of a system disruption. In addition, there are newer versions available from the vendors of some of our other internal systems offering greater functionality and reliability which we have not yet implemented. We also continue to rely on other systems we developed internally a number of years ago, which will require us to migrate to more industry-standard technologies. We areDuring the last three years, we have been updating critical enterprise systems in a way that separates our e-commerce, logistics, reporting, membership and costing systems from our dated ERP system in an effort to simplify the process of evaluating the state of all suchmigration to a new ERP system and minimize disruptions. As we have separated and updated these new systems, we have sought to improve functionality and establishingreliability, while simultaneously reducing our dependency on legacy software, including our current ERP system. Nevertheless, these updates and a transition plan to newer technologies. Anya new ERP system will require a significant investment by us, and any failure by us to seamlesslyeffectively design, implement and transition theseto new systems may adversely affect operations, memberMember satisfaction or sales.

Any failure by us to maintain the security of the information that we hold relating to our company, members,Members, employees and vendors, could damage our reputation with members, employees, vendors and others,them, could disrupt our operations, could cause us to incur substantial additional costs and to become subject to litigation and could materially adversely affect our operating results.

We receive, retain, and transmit personal information about our membersMembers and employees and entrust that information to third-party business associates, including cloud service-providers that perform activities for us. In addition, we and our third-party service providers store and maintain health-related personal information, pharmacy, and medical records in connection with our health and wellness and pharmacy businesses. We also utilize third-party service providers for a variety of reasons, including, without limitation, cloud services, back-office support, and other functions. In addition, our online operations and our websites in our Aeropost operations and in certain of our warehouse club foreign markets depend upon the secure transmission of confidential information over public networks, including information permitting cashless payments. Each year, computer hackers, cyber terrorists, and others make numerous attempts to access the information stored in companies’ information systems. The increased use of remote work infrastructure due to the COVID-19 pandemic has also increased cybersecurity risk.

The use of data by our business and our business associates is regulated in all of our operating countries. Privacy and information-security laws and regulations change, and compliance with them may result in cost increases due to, among other things, systems changes and the development of new processes. If we or those with whom we share information fail to comply with these laws and regulations, we could be subjected to legal risk as a result of non-compliance.

We or our third-party service providers may be unable to anticipate one or more of the rapidly evolving and increasingly sophisticated means by which computer hackers, cyber terrorists and others may attempt to defeat our security measures or those of our third-party service providers and breach our or our third partythird-party service providers' information systems. Cyber threats are rapidly evolving and are becoming increasingly sophisticated. As cyber threats evolve and become more difficult to detect and successfully defend against, one or more hackers, cyber terrorists or others might defeat our security measures or those of our third-party service providers in the future and obtain the personal information of members,Members, employees and vendors that we hold or to which our third-party service providers have access, and we or our third-party service providers may not discover any security breach and loss of information for a significant period of time after the security breach occurs. We or one of our third-party service providers also may be subject to a ransomware or cyber-extortion attack, which could significantly disrupt our operations. In the enterprise context, ransomware attacks involve restricting access to computer systems or vital data until a ransom is paid. Associate errorError or malfeasance by our employees and consultants, faulty password management or other irregularities may result in a defeat of our or our third-party service providers’ security measures and breach our or our third-party service providers’ information systems (whether digital or otherwise).

Any breach of our security measures or those of our third-party service providers and loss of our confidential information, which could be undetected for a period of time, or any failure by us to comply with applicable privacy and information security laws and regulations, could cause us to incur significant costs to protect any membersMembers and/or employees whose personal data was compromised and to restore memberMember and employee confidence in us and to make changes to our information systems and administrative processes to address security issues and compliance with applicable laws and regulations.

In addition, such events could have a material adverse effect on our reputation with our members,Members, employees, vendors and stockholders, as well as our operations, results of operations, financial condition and liquidity, could result in the release to the public of confidential information about our operations and financial condition and performance and could result in litigation against us or the imposition of penalties or liabilities. Moreover, a security breach could require us to devote significant management resources to address the problems created by the security breach and to expend significant additional resources to upgrade further the security measures that we employ to guard such important personal information against cyberattacks and other attempts to access such information, resulting in a disruption of our operations.

Business acquisitions or divestitures and new business initiatives could adversely impact the Company’s performance.

From time to time, we may consider acquisition opportunities and new business initiatives. During fiscal year 2018, we acquired Aeropost, Inc. (“Aeropost”).  Located in Miami, Aeropost is a cross border casillero (package forwarding) business that also operates an online marketplace. Aeropost provides logistics, payment, and e-commerce services in Latin America and the Caribbean and currently serves customers in 38 countries with Costa Rica, Trinidad and Jamaica as its largest markets. We are leveraging Aeropost’s technology, its management’s experience in developing software and systems for e-commerce and logistics, and its distribution and logistics systems to advance PriceSmart’s development of an omni-channel shopping experience

for our members. Acquisitions and new business initiatives involve certain inherent risks, including the failure to retain key personnel from an acquired business; undisclosed or subsequently arising liabilities or accounting, internal control, regulatory or compliance issues associated with an acquired business; challenges in the successful integration of operations, and alignment of standards, policies and systems; future developments that may impair the value of our purchased goodwill or intangible assets; and the potential diversion of management resources from existing operations to respond to unforeseen issues arising in the context of the integration of a new business or initiative.

We sold the legacy casillero and marketplace businesses operated by Aeropost in October 2021. In connection with this sale, we retained the technology and intellectual property rights required for the furtherance of our business interest in PriceSmart.com and related capabilities. We also retained the individuals formerly employed by Aeropost who we believed would best support PriceSmart’s objectives. We could incur unforeseen expenses or other issues in connection with the separation of these businesses. In addition, we and the buyer of the legacy casillero and marketplace businesses have agreed to indemnify each other for any breach of representations and warranties we made to one another in the purchase agreement.

On August 5, 2022, PriceSmart received notice from Click USA Inc. and Aeropost, Inc. alleging that PriceSmart had breached certain provisions of a Stock Purchase Agreement between PriceSmart and Click USA, Inc. dated October 1, 2021, concerning the sale of Aeropost, Inc. to Click USA Inc. In this notice, Click USA Inc. and Aeropost, Inc. allege that PriceSmart made inaccurate or incomplete representations and warranties relating to Aeropost, Inc.’s cyber security and the condition of its IT systems in connection with the sale. Click USA Inc. and Aeropost, Inc. further asserted that, in or around April 2022, Aeropost, Inc. suffered cyberattacks, and they seek to hold PriceSmart liable for some amount of damages due to alleged losses directly relating to the cyber-attacks as well as due to possible third-party claims as a result of the cyber-attacks. The notice suggested that aggregate losses attributable to these losses and future claims could exceed $3,000,000. Per the express terms of the agreement, the maximum amount of all losses for which PriceSmart may be liable for claims arising out of allegations concerning the above-referenced representations and warranties is $4,000,000. PriceSmart intends to vigorously defend itself and, as such, we have concluded that a loss related to this matter is not probable and any potential loss is not reasonably estimable; therefore, we have not accrued a liability for this matter.

Failure to attract and retain qualified employees could materially adversely affect our financial performance.

Our success depends, to a significant degree, on the continued contributions of membersMembers of our senior management and other key operations, merchandising and administrative personnel, and the loss of any such persons could have a material adverse effect on our business. We must attract, develop and retain a growing number of qualified employees, while controlling related labor costs and maintaining our core values. We compete with other retail and non-retail businesses for these employees and invest significant resources in training and motivating them. There is no assurance that we will be able to adequately attract, develop and retain highly qualified employees in the future or to replace retiring key executivesexecute management transitions when members of the Company’s senior leadership retire or otherwise leave the Company, which could have a material adverse effect on our business, financial condition and results of operations. We do not maintain life or disability insurance for our key executives.

‎

Legal and Compliance Risks

We face compliance risks related to our international operations.

In the United States and within the international markets where we operate, there are multiple laws and regulations that relate to our business and operations. These laws and regulations are subject to change, and any failure by us to effectively manage our operations and reporting obligations as required by the various laws and regulations can result in our incurring significant legal costs and fines as well as disruptions to our business and operations. Such failure could also result in investors’ loss of confidence in us, which could have a material adverse effect on our stock price.

In foreign countries in which we have operations, a risk exists that our employees, contractors or agents could, in contravention of our policies, engage in business practices prohibited by U.S. laws and regulations applicable to us, such as the Foreign Corrupt Practices Act and the laws and regulations of other countries. We maintain policies prohibiting such business practices and have in place global anti-corruption compliance programs designed to ensure compliance with these laws and regulations. Nevertheless, we remain subject to the risk that one or more of our employees, contractors or agents, including those based in or from countries where practices that violate such U.S. laws and regulations or the laws and regulations of other countries may be customary, will engage in business practices that are prohibited by our policies or circumvent our compliance programs and, by doing so, violate such laws and regulations. Our Aeropost subsidiary operates as a package forwarder, dealing with local customs officials in many jurisdictions in which we have not previously operated. In some countries, Aeropost operates through agents. Aeropost has been integrated into our compliance program; however, we have limited control over actions by Aeropost’s agents. Any violations of anti-corruption laws, even if prohibited by our internal policies, could adversely affect our reputation, business, or financial performance.

We could be subject to additional tax liabilities or subject to reserves on the recoverability of tax receivables.

We compute our income tax based on enacted tax rates in the countries in which we operate. As the tax rates vary among countries, a change in earnings attributable to the various jurisdictions in which we operate could result in an unfavorable change in our overall taxes. Changes in tax laws, increases in the enacted tax rates, adverse outcomes in connection with tax audits in any jurisdiction, or any change in the pronouncements relating to accounting for income taxes could have a material adverse effect on our financial condition and results of operations. In two countries, there have been changes in the method of computing minimum tax payments, under which the governments have sought to require the Company to pay taxes based on a percentage of sales rather than income. As a result, the Company has made and may continue to make income tax payments substantially in excess of those it would expect to pay based on taxable income, and there are no clearthe rules that allow the Company to obtain refunds or to offset payments that are substantially in excess of taxes payable based on taxable income. Additionally, in one country the government has alleged in the past that there is not a clearly defined process in the laws and regulations to allow the tax authorities to refund Value Added Tax (“VAT”) receivables.income are unclear or complex. We, together with our tax and legal advisers, are currently appealing these interpretations. However, if we do not prevail in these efforts, we may be required to establish a valuation reserve against these tax receivables and take an accompanying charge, which would adversely affect our financial condition and results of operations. In the meantime, we are taking other actions to recover excess taxes paid or withheld and to limit further increases in these receivables, including the possibility that we might choose in one of the jurisdictions to make income tax payments using the original computation based on a percentage of taxable income in advance of a favorable court ruling.

We file federal and state tax returns in the United States and various other tax returns in foreign jurisdictions. The preparation of these tax returns requires us to interpret the applicable tax laws and regulations in effect in such jurisdictions, which affects the amount of tax we pay. We, in consultation with our tax advisors, base our tax returns on interpretations that we believe to be reasonable under the prevailing circumstances. However, our tax returns are subject to routine reviews by the various taxing authorities in the jurisdictions in which we file our returns. As part of these reviews, a taxing authority may disagree with respect to the interpretations we used to calculate our tax liability and therefore require us to pay additional taxes.

A few of our stockholders own approximately 22.9%16.5% of our voting stock as of August 31, 2020,2022, which may make it difficult to complete some corporate transactions without their support and may impede a change in control.

Robert E. Price, the Company’s Chairman of the Board, and affiliates of Mr. Price, including Price Philanthropies, The Price Group, LLC, The Robert & Allison Price Charitable Remainder Trust and various other trusts, collectively beneficially own approximately 22.9%16.5% of our outstanding shares of common stock. Of this amount, approximately 76.5% (i.e.74.8% (i.e., 17.5% 12.3% of our total outstanding shares) is held by charitable entities. As a result of their beneficial ownership, these stockholders have the ability to significantly affect the outcome of all matters submitted to our stockholders for approval, including the election of directors. In addition, this ownership could discourage the acquisition of our common stock by potential investors and could have an anti-takeoveranti- takeover effect, possibly depressing the trading price of our common stock. 

Financial and Accounting Risks

We are subject to volatility in foreign currency exchange rates and limits on our ability to convert foreign currencies into U.S. dollars.

As of August 31, 2020,2022, we had a total of 4650 warehouse clubs operating in 12 foreign countries and one U.S. territory, 3640 of which operate under currencies other than the U.S. dollar. For fiscal year 2020,2022, approximately 77.5%78.0% of our net merchandise sales were in foreign currencies. We may enter into additional foreign countries in the future or open additional locations in existing countries, which may increase the percentage of net merchandise sales denominated in foreign currencies.

Our consolidated financial statements are denominated in U.S. dollars, and to prepare those financial statements we must translate the amounts of the assets, liabilities, net sales, other revenues, and expenses of our operations outside of the U.S. from foreign currencies into U.S. dollars using exchange rates for the current period. As a result of such translations, fluctuations in currency exchange rates from period-to-period may result in our consolidated financial statements reflecting significant adverse period-over-period changes in our financial performance or reflecting a period-over-period improvement in our financial performance that is not as robust as it would be without such fluctuations in the currency exchange rates.rates.

In addition, devaluing foreign local currencies compared to the U.S. dollar could negatively impact the purchasing power of our membersMembers for imported merchandise in those countries. Merchandise imported into our markets is generally purchased by the Company in U.S. dollars and priced and sold in the local currency of that country. If the local currency devalues against the U.S. dollar, we may elect to increase prices in the local currency to maintain our target margins, making the products more expensive for our members.Members. We may also decide to reduce or modify the flow of merchandise into those markets. Depending on the severity of the devaluation and corresponding price increase (as experienced in Colombia in 2015, 2020, and 2020)2022), the demand for, and sales of, those products could be negatively impacted.

Finally, the ability of the Company to convert local currency into U.S. dollars to settle U.S. dollar invoices can be impacted in certain markets due to economic factors or government policies creating illiquidity of the local currency. This washas been the case in Trinidad at the end of 2016,in fiscal years 2017, 2020, and 2021, which led us to reduce shipments from the U.S. to Trinidad to amounts that our Trinidad subsidiary could pay for using the amount of tradeable currency that could be sourced in that market, resulting in lost sales. This illiquidity has continued, with periods of greater or lesser availability of U.S. dollars and other currencies. Toward the end of fiscal 2020 and continuing into early fiscal 2021, the Company’s ability to convert Trinidad dollars for U.S. dollars has deteriorated.

As of August 31, 2020,2022, our Trinidad subsidiary had Trinidad dollar denominated cash and cash equivalents and short and long-term investments measured in U.S. dollars of approximately $79.6$25.0 million, an increasea decrease of $54.7$27.9 million from August 31, 20192021, when these same balances were approximately $24.9$52.9 million. The Trinidad central bank manages the exchange rate of the Trinidad dollar with the U.S. dollar. While the recently electedTrinidad government has publicly stated it has no intention to devalue the Trinidad dollar, the Trinidad governmentit could in the future decide to devalue the currency to improve market liquidity, resulting in a devaluation in the U.S. dollar value of these cash and investments balances. If, for example, a hypothetical 20% devaluation of the Trinidad dollar were to occur, the value of our Trinidad dollar cash and investments position, measured in U.S. dollars, would decrease by approximately $15.9$5.0 million, with a corresponding increase in Accumulated other comprehensive loss reflected on our consolidated balance sheet. Separate from the Trinidad dollar denominated cash and investments balances described above, as of August 31, 2020,2022, we had a U.SU.S. dollar denominated monetary asset position of approximately U.S. $4.8$80.3 million in Trinidad (net of U.S. dollar denominated monetary liabilities) that, which would produce a gain from a potential devaluation of Trinidad dollars. If, for example, a hypothetical 20% devaluation of the Trinidad dollar occurred, the net effect on Otherother income (expense), net on

our consolidated statement of operations of revaluing these U.S. dollar denominated net monetary assets would be an approximate $1.0$16.1 million gain. However, followingWhile we may pay premiums or enter into financial transactions at a significant additional declinediscount from the official government rate to convert our Trinidad dollars into U.S. dollars, we use the official exchange rate published by the Central Bank of Trinidad and Tobago to measure the U.S. dollar equivalent of Trinidad dollar-based revenues, expenses, assets and liabilities and the Trinidad dollar equivalent of U.S. dollar liquidity beginning in August 2020dollar-based monetary assets and continuing into fiscal year 2021, this net monetary asset position has shifted into a liability position in early fiscal 2021, subjecting usliabilities for financial reporting purposes, as there are no other reliable references available to potential losses in the case of a devaluation, which would be recorded in Other income (expense), net ontranslate or remeasure our consolidated statement of operations. We are carefully monitoring the situationrevenues, expenses, assets and taking steps to mitigate the risks. For example, as liquidity conditions have tightened, we have methodically raised prices, initially on imported goods, and have sought to shift the purchase of goods to local sources, where appropriate. Additionally, we are actively monitoring our ability to exchange Trinidad dollars for tradeable currencies, in order to manage our exposure to any potential devaluation, and in early fiscal 2021 have begun to limit shipments of goods from the U.S. to Trinidad in line with this ability. These actions may result in a decrease in our sales and/or profitability in Trinidad.liabilities.

Volatility and uncertainty regarding the currencies and economic conditions in the countries where we operate could have a material impact on our operations in future periods.

Changes in accounting standards and assumptions, projections, estimates and judgments by management related to complex accounting matters could significantly affect our financial condition and results of operations.

Generally accepted accounting principles and related accounting pronouncements, implementation guidelines and interpretations with regard to a wide range of matters that are relevant to our business are highly complex and involve many subjective assumptions, projections, estimates and judgments by our management. These include, but are not limited to assumptions, projections, estimates and judgements related to contingencies and litigation, income taxes, value added taxes, and long-lived assets. Changes in these rules or their interpretation or changes in underlying assumptions, projections, estimates or judgments by our management could significantly change our reported or expected financial performance.

For example, because of Accounting Standards Update ASU 2016-02 – Leases (Topic 842), which the Company adopted September 1, 2019, the Company is required to recognize a “Right-of-Use” (ROU) asset and lease liability for each of the Company’s long-term leases. Accounting Standard Codification (ASC) 842 requires that the ROU asset be designated as a non-monetary asset and the lease liability as a monetary liability. Therefore, when accounting for a lease that is denominated in a foreign currency, if remeasurement into the lessee’s functional currency is required, the lease liability is remeasured using the current exchange rate. We have leases in several of our subsidiaries in which the lease payments are denominated in a foreign currency that is not the functional currency of that entity. Therefore, we are subject to additional volatility in foreign currency exchange rates as a result of this accounting standard update. The monetary lease liability subject to revaluation as of August 31, 20202022 was $35.5$32.4 million. Due to the mix of foreign currency exchange rate fluctuations during fiscal 2020,2022, the impact to the consolidated statements of income of revaluing this liability was immaterial.

Item 1B. Unresolved Staff Comments

None.

‎

Item 2. Properties

At August 31, 2020,2022, PriceSmart operated 4650 membership warehouse clubs, as detailed below:

Item 3.Legal Proceedings

We are often involved in claims arising in the ordinary course of business seeking monetary damages and other relief. Based upon information currently available to us, none of these claims is expected to have a material adverse effect on our business, financial condition or results of operations. Refer to Part II. “Item 8. Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements, Note 9 – Commitments and Contingencies ” for additional information regarding our legal proceedings.

On May 22, 2019, a class action complaint was filed against PriceSmart, Inc., as well as certain former and current officers in the United States District Court for the Southern District

Item 4. Mine Safety Disclosures

Not applicable.

‎

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The Company's common stock has been quoted and traded on the NASDAQ Global Select Market under the symbol “PSMT” since September 2, 1997. As of October 19, 2020,21, 2022, there were approximately 20,35424,689 holders of record of the common stock. 

Recent Sales of Unregistered Securities

There were no sales of unregistered securities during the fiscal year ended August 31, 20202022.

Dividends

Repurchase of Equity Securities

Upon vesting of restricted stock awarded by the Company to employees, the Company repurchases shares and withholds the amount of the repurchase payment to cover employees’ tax withholding obligations.

As set forth in the table below, during fiscal year 20202022, the Company repurchased a total of 56,50388,415 shares in the indicated months. These were the only repurchases of equity securities made by the Company during fiscal 20202022. The Company does not have a stock repurchase program.