PSMT - Earnings call transcript Q3 2019

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Operator

Good day, everyone, and welcome to the PriceSmart Inc. Earnings Release Conference Call for the Third Quarter of Fiscal Year 2019, the 3 and 9 month period ending on May 2019. [Operator Instructions]. After remarks from our company representatives, Sherry Bahrambeygui, Chief Executive Officer; and Maarten Jager, Executive Vice President and Chief Financial Officer, you will be given an opportunity to ask questions as time permits. [Operator Instructions].

conference recorded, this XX, Thursday, reminder, XXXX. a is today, being July As will July for available the digital and be A replay code access through X-XXX-XXX-XXXX international the XXXXXXXX. by entering replay or conclusion call XX, dialing callers X-XXX-XXX-XXXX domestic for callers of following XXXX,

over time, I conference to Please Jager. turn like this Maarten proceed, At the would to sir.

Maarten Jager

and fiscal call for quarter of year Thank earnings you, the our Chris. welcome to Thank XXXX. you, third

press we will July our release discussing earnings information in We we XX, afternoon, and that both yesterday provided which be of XX-Q, our the released XXXX.

both release website You the can on filing the our find www.pricesmart.com. press and XX-Q at

plans, As to will, of are to today, year as are Securities October on including this expectations statements cause materially, Exchange are could results expressions. update fact, revenues conference matters. in as during a All of based actual XX, on not but and These and August limited concerning historical assumptions the XXXX. the XX, that may, uncertainties made the company Commission expect, differ are should, forward-looking statements all containing risks reminder, made call, risks forward-looking for fiscal company's obligation XX-K on call. The other and annual to future to the Form detailed the current and July forward-looking filed report statements with no ended XXXX, the believe, on related statements similar and subject statements XXXX, words than statements statements estimate XX, anticipated company's undertakes this

Officer. Bahrambeygui, Sherry PriceSmart's over Executive I Now it will turn to Chief

Sherry Bahrambeygui

morning, club smaller last we've us of are openings, Good been everyone, quite new thank and Thank joining our with you call, designs. our today. both which busy format Since you, for Maarten.

X. Santiago first as club this with mention a early, of strong PriceSmart Veraguas. It's indicated opened although XX,XXX membership with in sign-ups. club Panama, reception floor. and characteristics things approximately X hours is rural to area, built of May club I'd agricultural sales closely the opportunity growth located the our there. or Veraguas, still from local merchandised specifically This this about we're square miles performs our on pleased mind. feet clubs believe Veraguas smaller like It's locations our first within has And more format which markets. with The it's by some because our XXX club We're been watching healthy broadens as market about de expect, nearest it in if we for in secondary it we existing about Panama,

This alternative and drive very use In Bolívar, smaller leveraging supports footprint. smaller we us was organics get members our initiative newer Domingo's provides densely-populated it's I X opportunity opening second that Republic. sales means setting. value. feel. different in can with updated exercising a in a fresh, that is are additional sense various in discipline Recognizing and footprint ago. demographics foods by technology to club efficient modalities a weeks within are merchandised attended our Dominican the Santo urban This prepared a also ability merchandise how that and good see just the sales look to to strong format club The in emphasized at and items, smaller the more there, a with testing to specialty the we're there. within SKU more drive and trying we club we've club There to

including practice the power, construction. materials to effort we've packaging, also indigenous mention for this the initiatives green recycled solar in use club, biodegradable real more of steel superstructure with that into I want put and in materials

to this of which to location and the and central food traffic seeing the offering, weeks, club. X we Although attribute it's expect higher-than-average and updated been the we're penetration to we sales, service drive frequency only

were Rights to excited I of and Six and club, with this being every nights each of It's Merchandising acknowledge meticulous were am how the ensure about urban and before in the The employed. beautiful really they that detail in saw setting. addressing opening impressed its a how days team that I have about our firsthand prospects last I to we're

the of club City are and Cristobal. be X Guatemala getting opening in be in located next in Panama seventh the in This We club also ready additional will will The followed new for by clubs. our our of Panama. will fourth club our opening Panama San opening be --

to is season. goal of peak both open clubs these holiday shopping Our by the

in appreciative location really of buying have excited X basically accelerated been within X-month closed Guatemala. are and key real our in very on pace X- also to a a we very estate Cayala, that teams who to about hard open period. the we've QX, working operations, and clubs a new property very During I'm logistics

of on lot our of a to we the real work activity addition development In PriceSmart.com. estate on the front, continue

omnichannel well from that of create to includes catalog that's available club picked an -- and distribution include our a the merchandise as available be shipment. as we delivery is from digital comprehensive merchandise delivered to will will at cross-border for a also regional or center up experience that vision member vendors or Our directly

with our small members to is understand PriceSmart transformation. their As better our focus to promoting we omnichannel digital our that no come the a improving we upon requires help develop capabilities, and continue a with capabilities on that culture This embraces analytics task experience. improve us

Bolívar flow for relative personally June. Inventory flat chain. Inventory club QX of X the Dominican. are recently when ago during clubs improvement club. with observed levels improved firsthand I supply visited and and roughly has our I additional a the through year in that an the to buildup to the Turning and

efficiency my of our see a stocks. focus to of of supply was on especially out to early and beginning in reduction efforts we're chain, One with results,

consideration as optionality and and members, the we're to factors, dedicate to evaluate vendors tariffs to centers. continue various into our our maximize ways regional flow dynamics ultimately most from building the effectively taking our such to resources We and to and ways intelligent merchandise efforts with to changing distribution DCs clubs our China

investing Regarding we memberships, on and members. we to are and our can the build provide membership, that resources we're strengthen business to services value pursuing business opportunities more the our

We clubs value in for continue for we and plan next on fiscal markets. add additional to Costa optical proven merchandise members, out XX to in in approximate X better our within services quite PriceSmart and we've locations year example, expand several successful, Rica, to provide ways be rolled the which to has currently another

and has countries, traffic continues Costa and suffer we're up new tax seeing against protests in and has massive which political go Overall, imposed products impact government; of certain been on increasing on effect VAT month. instability; that's is had tax expected Nicaragua, certain to increase to there income an even And there prices. levels from this into Honduras, the at where which which personal rate all imposed also laws, Rica, an

our of of $XXX.X me QX. were in Total results sales, income. of let and an to $X.X million, primarily export prior of membership with revenues now $XXX warehouse in comparable $XX.X turn an X.X% other revenue increase Revenues $XX.X million million, and in the period. sales consisted million over overview So year income million

sales with our impact fluctuations currency increase by period. sales Currency on were of sales comparable year merchandise in XX.X clubs X.X% had X.X% impacting month negatively the XX more Comparable prior net merchandising negative opened fluctuations X.X%. net a an by $XXX merchandise X.X%, than sales. over Net million, decreased

clubs XXXX. XX QX, the ended As of quarter a year of XX clubs reminder, quarter, we to with this warehouse the end at third compared fiscal

includes or per Net share income for $X.XX a a in the the and $X.XX compared in was $XX.X business year. to of capabilities, acquisition. March year result from third XXXX or share acquisition and the $X.XX XXXX million comparable fiscal our operations combination the omnichannel costs our last legacy the per made of impact quarter period technological share $XX.X with year's with per million of associated ongoing we the This of associated investments in that development platform

Turning in The by general by at Central decrease and X.X% Sales American total where segment. impacted merchandise segment, in XX impact we on comparable sales in total Nicaragua, American Central quarter Panama, sales weakness I of a each were decrease a earlier. what economies had clubs those now is we believe contributed had X.X%. sales currency in the These a sales. sales were countries X.X% some total end, Rica, The the and comparable Costa to comparable segment that approximately little the negative of to Honduras decrease. of and described X.X%

which sales, the The were which not are affected and the Turning clubs Trinidad same-store in sales. sales segment opening sales basis impact overall net San with X.X%, segment, and a positive Isidro led respectively, by included comparable adversely had of contributors, to in and Jamaica sales Caribbean that to both was of growth reporting sales contributed The way comparable end, to at DR growth basis sales -- negative same-store X.X%. of of Caribbean store. Aruba with the the of had XX positive same-store approximately from also total in Isidro cannibalized points the while approximately USVI were and and where Caribbean. points. calculation, The XX.X% on comparable we negative XX quarter store, XX had other currency strong in the growth strong total sales X.X%. of is on San sales the included comparable clubs merchandise impact segment X.X%

currency sales -- a X.X% X.X%. and total on XX. decline respectively. clubs end, comparable was a in where was last, of had had And XX.X%, with we Colombia X Colombia, significant. negative at and impact XX% quarter comparable negative year-over-year It of sales The decrease

fresh and deli category in We including We and In in foods we dollar comp tires U.S. increase and U.S. our lower nonfoods. and and small saw foods soda meat We terms seafood, in supplies, of categories merchandise in growth growth our strong appliances. saw flat departments. pet slightly were seafood, local beverages, canned sales highlights, to had overall foods.

X.X% which at the to finished was approximately income year-to-date. increase membership, X.X% is consistent regard XX%. Membership with quarter The million XX-month up the rate was a end renewal at by account, With we quarter. during X.X May fiscal of the

base. our of some considering continues grow. model, headwinds XX% membership It's Republic, in the Rica, weathering that to Platinum are many almost X% as sign unique rolled memberships in our Panama, addition, membership Barbados. program out And USVI, represented Jamaica business Dominican can we Honduras, total Costa grew especially has year-over-year markets. you of base and see, these good and now been In Platinum for our the a

by June merchandise a X.X% to which impacted merchandise year sales quickly fluctuations Net increase an Turning FX sales negatively released ago. this million, were were sales, $XXX.X of X%. versus week.

For FX the of June a with X impact sales negative increased by X.X% comparable X.X%. XXXX, XX, ended weeks merchandise net

of and With location. new the our our In closing, loyalty we business our the have of encouraged focus be level to in confidence Rights and disciplined reception continuing we're time. model, the our by seeing operate and significant from in members the drive we're sales growth more challenge to efficiently every we revenue by believe same-store to company, we'll Six ourselves at over on able

by growth our that conjunction adding that digital membership in of value. and believe we're clubs drive to formats also new from new omnichannel sources We shareholder strengthening with and capabilities new our foundation

Once our thank employees and again, and approximately commitment our their to company. especially for dedication recognize X,XXX to I want internationally

your further to into go Thank our our you Maarten turn results. Jager, who'll quarter for over Chief time. call the third now detail about I'll Financial Officer,

Maarten Jager

Thank to business, you, versus which merchandise year co-branded decreased came along ago. offset margins. on mainly total payment XX.X% basis cards. due income generated Aeropost margins from margins our the basis lower to XX.X% margin decreased from shared of non-merchandise year margin points revenues increase the XX.X% ratio of with in Merchandise margins XX legacy lower with Sherry. XX a points, period to and by margins the net gross Total Starting XX.X% to reclassification revenue by due at ago, gross for approximately from a

to The for clubs Panama. remaining had the to increase basis SG&A versus will other already operations be year expenses the and total the expense Operating QX. versus club of $XX.X year. to opening the and expenses calendar the higher business as decreased total XX by points revenue was after $XX.X XX.X% approximately or year a ago, which year club close million largely million, million X in to versus X QX the that in Operating income of new pre-opening pre-opening opened well clubs XX.X% the the for business been million revenue merchandise was Veraguas net core ago. as again is total due Warehouse $XX.X for of attributable a ago. the increased X by margins income for warehouse $XX the of clubs X.X% X.X% due club to other opened a X lower

tax. to on Moving

of be last quarters timing X the we XX%. both with made consists and earnings U.S. rate in digital XX.X% tax impacting drive our expand and than largely primarily This XXXX, to offset value distribution tax the platform, pricesmart.com asset coordination year in our to in the was Aeropost, currently effective versus X.X%. the is incurred due first was of tax QX, legacy increase by quarter, we acquisition effects adjustment The loss rate the member in incidental the full XX.X%. For of same of omnichannel the higher from by of clubs the our the believe our costs tax from reform. us that warehouse March we Recall by the tax the which quarter footprint. business estimates capabilities rate investment driven U.S. with of partially value the will reform year X.X%, our Consistent to last call to in expect

are business investments impacted And our which digital the $X.XX there the past $X.X income for net before, or income Aeropost million impact by share. total I've finally, during legacy impacted as buckets per by quarter. net for acquisition-related the $X.X million. income The X adversely by of quarter. into accounting these quarter is adversely adversely net of $X.X impacted million million mentioned The platform income The $X.X the net impacts,

to with of very of the cash million ended remains of months sheet, strong. an year. company which Moving on The and quarter first equivalents the the X increase during $XXX.X cash the $XX.X million, balance

operating quarter months, year million versus $XX.X to $XXX for due activities million. This favorable During cash last million $XX.X a same the first improved the of by in primarily was swing working X provided capital. was

year, respectively. clubs, for new primarily the in Investing were Aeropost in other the declined with million, Veraguas, million loan scheduled used used cash of increased last and year the $X.X due associated along in activities fewer Dominican investments. activities financing nonrecurring due warehouse and acquisition short-term Bolívar our Net activities significantly San investing primarily the X to Net Republic of by again regularly $XX.X purchases acquisition to that's Guatemala, payments. Panama, $XX words, construction Cristobal with of this Metropark, business in primarily million cash the purchase

and a reported in dollar business sales, seen In as currency largely of continuation overall rates, renewal currency of headwinds by we've constant we counts have sales and devaluation. summary, foreign were membership some opportunities. U.S. significant our reinforce fundamentals our by model business which The evidenced strong impacted growth our that a

omnichannel to continue driving the will Rights, delivering announced our focus and real We launching sales, same-store continuing on to our Six on digitally-enabled estate pipeline and platform. develop

Our balance and growth flow sales same-store future shareholders and strong, remains our alike. will solid members cash which benefit provides a driving sheet, that and for liquidity foundation

to it turn now will we over Operator, Q&A.

Operator

[Operator Instructions].

Jon of Kansas Our first from Braatz City question Capital. comes

Jonathan Braatz

something third XX.X%. say came of you Let's had move quarter margins -- turn at was margins That -- in a or seen margins gross since in Gross lowest little a this reduce change some to to when on looking XXXX same-store May trying should -- looking little this of see pressure new is that competitive I of margins continue, sales conditions? we something is be this been margins? at? a we're merchandise. Has to but bit that you're sort in know at a level margins to XX.X% bit. merchandise I the -- in or should a had of drive margins at to there we've came warehouse XXXX, Is

Sherry Bahrambeygui

not In answer our is expectation. short, is the that

markdowns place us We in are addressed, competitive some focused on to there that certain that margins. We clearly the on dynamics inventory is, that be the improve we'll our that Maarten, but increase forward. improving and took to allowed focusing there going had flow flow, on were we is and is no, on want short margin that? expectation there focus drive able also do on But an expand margins help to you answer sales.

Maarten Jager

right. exactly Thanks, that's Sherry. No,

We are expecting to improve on focused on and it, it. we're

all in about margin of numbers me bit Colombia, then erosion came some that see you XX color of so But points about Caribbean. the you a geographic context. the this in saw XX Colombia little XX America in basis on give that's of Let a breakdown. Central -- in just so more regions. and reduction, some in it, our XX of -- there's We that about

were markdowns it There FX in bit there of you mentioned, us. particularly, that of look clear as to that different to up we If a from impacted inventory, nonfoods. was there's Sherry drivers, in course, at also, took our

So it that's is, us. mentioned we that, her in remarks took And that there. from Sherry some the and good behind news markdowns earlier

already Our inventory year-over-year as that's XX, the it was receiving is flat opened were while visiting of that, club also anticipation was mentioned she flowing DR, in roughly its additional and open an and Bolívar opening. better. things steel there Sherry and end of wasn't less with was the that there of and open XX the club with May at that inventory more May build-up in saw

I factor, of other pressure, John. one the Caribbean, are the factor, So our competitive in there would some markets say primary in that's particularly the not but

then sure dynamics. with it. think needs we normal, in back, managing is asking it. course, that's suppliers. of additional working and our summarized, to We're we So We're done not But with in up We've this, some upon just as And we Sherry the of member making exercise imported clear. looking the are and can also pricing we new be of that questions inventory, versus competitive of all terms stepping local, sourcing monitoring mix in mind are it, we at value the this discipline. the short, cleared and improve and

Sherry Bahrambeygui

cost the a have are Yes. including market at specifically We by focus, the looking very do of aspects, market doing we landscapes, and strong business. competitive all

with delivering and discipline margins within factors the very there making the of on concerted members. in value to good relevant sure all is all are of a appropriately our that focus set So mind

So we're looking disciplined there's to a at forward. margins very taking going approach

in And last so see that same you have I quarter. would would the you expect not that the

Jonathan Braatz

Maarten, Sherry.

to some and or be terms of these of one-time sense can reducing is on you ex-out items, mentioned what you of sense in amounted there so forth, those to items If were to may us -- maybe these so markdowns you margin? in one-time the quarter some the a as any give

Maarten Jager

try you me part. to Let help in

right. XX have mentioned of would good cleaning inventory. but have about contributed and XX fingertips, you think roughly, I rest it markdowns of points, basis the in all my we That the of points pretty it, the don't nonfoods on up XX I to So basis some a give okay, But indication. it

Jonathan Braatz

Okay. much did All difference are X final and And of it talked local the how you other then I'm using merchandise. curious to one? your big locally between of right. I percentage and Sherry, the appreciate Panama -- that. more as net the a question. new lot stores sort of your relative location Compared to about merchandise stores, derived? what stores in this

Sherry Bahrambeygui

So local Veraguas said more I I've agricultural you're of an about it's now merchandise, rural talking anything don't club area... in know that and the right about that

Jonathan Braatz

Yes. Yes, exactly.

Sherry Bahrambeygui

No.

made But out type tools… member that of we or the statement by meeting they that's in comparison. demographic, of needs location need example, I membership the that for with from have the terms of machinery Bolívar that of of that products and type the very that think agriculture there the in on the way we're focused I just which distinct, is

Jonathan Braatz

successful, might stores how had I'm look expand you Okay. markets? as it is said. that proved you location such When opportunities your across what misinterpreted and this I at if your sorry,

Sherry Bahrambeygui

doors is are towns it's mean early footprint properties up But for have haven't and it screen it, to the really can minds be too as want those we perfectly doors. to it perform right less been it's growth. subject the doing areas, a much to good want excited our I'm does open other meet members needs to I it's expensive because at and other to level of really the personally, tailor expecting areas, locations, results, are perform, open the build And Veraguas before. not don't sets does up that bit But our in be the our the we been past. It sure these Well, on focus expected. this so an radar performing the we tell. too I consider in honest, that positives. on smaller. markets about can on it if we're to for that opens really to really it that geographic us something Because prospects, we Because these can I our the do that in to overstate of make going tell. based but feel early see that to opportunity If we're

Operator

Our of Bookbinder next question comes from Securities. Ronald IFS

Ronald Bookbinder

additional margin gross for Thank the last lower gross Aeropost the but margin, color merchandise why business on the the you versus on year?

Maarten Jager

back give you to Ron, on going I'm get that to have to one.

Ronald Bookbinder

problem. Okay. No

Maarten Jager

this Late afternoon.

Sherry Bahrambeygui

piece our just to to to we've this to using over are before of fact process a earlier test you information, we sorry, in pricesmart.com, that pricesmart.com. building I'm we migrate the And the things as markets site discussed give certain -- we're aeropost.com the

some effort pricesmart.com once been is drive some to that So of activity something well. proven working we've the over there has to

that becoming finding what little more So frankly, blurred time. PriceSmart it bit of a are Ronald, the as should aeropost.com and over activities we're is

you to but can on don't get following back specifically that. think happening. I just Maarten called what's wanted to give I that out So some background But we've information, you

Ronald Bookbinder

a tough you now, since just store of overall Okay. view And is of seem but in September It having there, FX there guys Colombia? situation Colombia, have what down Chía you're opened right in like the a XXXX. doesn't

Bogotá? up we And stores, ramping these in smaller a office estate Colombia? new still real do With have could guys you in format see a

Sherry Bahrambeygui

No the we're -- trying fluctuations, you estate market. issue currency, The know, one, doing same-store us. The well. well you there constant is to for Colombia. membership We is that are look the more then make there. yes, I opportunities point with it comps challenge sales is small for believe been are your a format, as up on there, opens company devaluation through if in to, has currency. expenses smarter for of generate real regard merchandise our in received separate and that doubt, FX we for a more our some for and also now for in find with suitable effect us strong. right matching sales. a to the of with about And with challenge and currency to revenue looking in obviously active to was ways and comment the We're real pursuing estate a looking be us up We locations. opportunities grow But wanted the We're to that the

So we're not the FX being of passive in effect. terms Colombia

locally. ways the are only source other of a we're We not developed negative looking It's to more to we you market, very for where merchandise exports but source impact markets. some is that of if the looking Colombia able hedge, naturally merchandise market. one FX. will, smart exciting can to And expand be for into

very, are of committed cultivating company in Colombia, overall. we will resources not very to the strengthen So terms just expanding but that clubs,

Ronald Bookbinder

FX And core very been actually you if actually opportunity you've guys performing you performing impact. smaller has business been new your -- out And the stores of exciting well now the into going Okay. markets. back have this got

I consider Given the of where don't why stock have your the and your one know forward, valuation but states a authorization? going have an the repurchase you share stock, expect Board you to that program Q lower don't wouldn't is, given

Sherry Bahrambeygui

and And time. estate, for comment we other real is it, to strong make efforts beyond don't can than any that, That's prior first explore. other Our as this I on that really there be. estate are it at have company can this that real there possibly where as is potential a to focused all

Maarten Jager

have flow we've opportunity and to -- believe question. think you have We number a of ahead estate lot significant a business, as markets, course, our generate, growth requires of of I lot great investment. operating of a continued from know, real we we that in cash which, of us a

and -- grow it the focus so back And to context, new in same-store do to to sales, chain do supply to to new invest is estate, it's in in broader with is markets our is real omnichannel. up our focus first our

first our in to growth. the so operating casual And protocol for is our invest future

COGS fourth more from with with a detail a the a XXXX, a quarter to Aeropost of thorough bit comparability was I'll G&A creates follow-up come issue I'll in quarter-over-quarter. back reclassification a to bit there more the but you little started margins, on of answer. But that which

Ronald Bookbinder

Would in future the we expect quarters? that continue

Maarten Jager

I Thanks The for to but would reclassification said, Yes. I'll with continue as those I -- you. hit questions. us, follow-up

Operator

of The question Scotiabank. comes Rodrigo from next Echagaray

Rodrigo Echagaray

Sherry I my -- end. two guess, and question from Maarten. on

hand, sounds one sounds that's but new case. the it promising the the On are like formats like stages, early

also that so touched And we've think think But smaller be urban maybe result that you of Do cities, I far, countries? guys these formats? likely a new new what more the opportunity areas. about on is of something should more as

Sherry Bahrambeygui

formats, of us that Yes. markets. digital Not the just allow but new because capabilities test to of the potentially new because

countries. So as are part of additional in our ongoing efforts generally, we evaluating opportunities exist that

that don't on have really point. at this more So anything

Rodrigo Echagaray

that the result the that initiatives analytics new that help as better? guys now assessment? of be Is could Aeropost -- that to like that feel data and countries you potentially that is have online correct related you would a you find And is --

Sherry Bahrambeygui

this, It's it's the model test and the omnichannel basically that potentially but of in different different analytics into the the ability and down PriceSmart that play analytics. the omnichannel also merchandise we so as the the much brand I'm allow the through markets road capabilities or can would markets sure provide. support us PriceSmart not and to technological reception that

Rodrigo Echagaray

of slight if pickup seems in it. on working bit a formats, a there capital, progress store a And new us take be of Okay. back, there's to lot Got openings. there's I

And some are like you of there's say lot mean, next would maybe top sounds midterm? be so your say, would promising for and initiatives. these a you of I year is things top priority priority would what what Sherry, happening. But for, say, your year? fiscal next It very

Sherry Bahrambeygui

to hand hand that to between put the digital flow our to side to -- be substantial with the capabilities merchandise really the we manner opportunity see in with continue to cost-effective maximize digital brick-and-mortar in estate the We relationship, that the most the And members. as of to want interrelationship development our transformation. real in able strengthen efforts a on in we

and also or our it's and holistic and strengthening what be in investing on it's from grow doing to building we're interrelated. our continue further the able to focused to that all we being taking We're team people the capabilities so management have well. duly without away people, very So distracted our bandwidth

Rodrigo Echagaray

maybe or Okay. else number. Anything in think to takeaways? regions same-store anything else you print negatively. I But the terms latest some than the of impacting was the the probably of that touching you of trends And seeing that mean an recent that, FX, sales what I the uptick be other on? on mean that you're the relative most of the obviously, Maarten, still on are the announcement, say interesting previous might I there maybe, can on some would on is months? touch worth

Maarten Jager

sales you June are release or referring Roderigo, to the you are referring to...

Rodrigo Echagaray

Yes.

Maarten Jager

Okay.

speaks June I by parts itself. to some good with release July, X want month market. well of of that We statement. early be was the the the think but sales very in sales. It's received It cautious for I momentum see here continuing

our -- We also Sherry earlier I margins comments, as our better. both we're also have and managing are addressed addressing in

far I to recently We I to well. and relative I it's in little Colombia want devaluation think it's a about the still And coming as bit mean particularly for of see less is, as but would that's yes, go. impact month. that's in significant, a So little what abated bit.

Operator

of LGM. comes next Thomas from Vester The question

Thomas Vester

how be is margin, we little you in sales -- margin back should it to can trending historically level sales that the margin. you on really same-store level margins US do what maybe a dollars of -- seeing understand I takes because much it feel at what what and on swing for back it you differently, bit clearly, for has Just comfortable been sort had? before I'm a to beneficial But you're should see same-store to what compressed So the while? level trying what because in ask quite

Maarten Jager

sales is sales relationship. the foremost, link trying Well. excellent to focusing I driving question a behind But same-store margin. we're appreciate and there intent to the on and merchandise. through first Obviously,

when the because have with expenses, you your as increases, that to know kind you the the allows proposition. we the model cetera, then You et same-store your inflation to as fixed from leverage higher our know, increases. I'm then expenses of best reinvest sales business value that sure And and in model to you wage digits variable single business start increase studying well middle in works and that

the So excellent explicit in I sales although, draw two, some of With same-store cleared behind focused excess want question. what That on the understand an had out don't merchandise. driving, We've we're we the in that intent to for link need we're your to between just offering QX. itself, your of I sales, an and course, really in of will members. our excellent down, don't market And -- same-store you to that merchandising root when have help but right? sure at we of it make is

Thomas Vester

sense. Makes Great. Okay.

in on is second -- more I Just on my X rural touched Panama the upon, Sherry. question store you that questions. mean

when it you us able do in would what tell secondly, First it's or And when promising mean a terms something get obviously, that expect it? to But it helpful tell should key factors. looking there's you is not? is to see some you will evaluating I sign, are ahead So you say could about can be go parameters but decide be of you the evaluation you those something of this all, elsewhere interesting things for? not the be what of that to evaluate some whether with on. to on clarity you X to you're early, too that really number or what hear are

Sherry Bahrambeygui

in obviously, close allow and evaluation our one a a a it the grow to is threshold we going with build estate would less of relative see that have of costs is club, metric a of us attention And are what required real and was those Well. to of and some to the being ongoing. square the and sales out savings sales that can required is we that a per run confidence as with the market with play that results returns come along threshold investment forward would other smaller in -- other if to secondary our locations. of footprint, are to questions threshold to within smaller that extent club that can footprint closely. The order watch investment we generate foot, we that things that the the type And the sales that

Thomas Vester

Yes.

for the guess, other time guess, -- you question, much been be I also source that And bottleneck it CEO but that that been Because scalable guess, in is has Maarten one you be easier as X you much places. roll real out should my brings Okay. that's be to that. then it second-tier proved in and want I me should becoming because explantation, long especially the should be but would if estate, PriceSmart more to in real or because Colombia, related less I'm also to a In I fast not I a the whether something these cities. been cities sourcing and your part the has pre assume, CFO, that's to bottlenecks biggest model right, for estate bottleneck to

wrong maybe be you to assumption. that's should able track So But fast the that.

Sherry Bahrambeygui

more we're least the certainly That's the from different a estate reduce the -- in through capabilities to do investment. of on real have challenging smaller where becoming we estate of that. noted result from to would delivery without the I'm do could with investing the that these calls the sorry, central look by the can it to real to hope. our formats one barrier and so way was cost real merchants cost that could real ways all for or much cost last omnichannel explicit by was going on And and a by merchandise investment so of if -- where already we through using also estate with ways additional at finding for see estate we from you've sure, because the company markets clubs. e-commerce. to the where and our support the down justify that sales we -- to I of approaches we bringing the were that for estate areas for some a members in real business whether community X investment these approaches we've type the how vendors as the of it's get But being our I'm And solve focused challenge appropriate, in of shared the directly healthy associated of for of mean, that need us, profit

Thomas Vester

Yes.

right, talk converting bit Okay. -- additional seems change Makes team CEO. about since you into we little been new to Can mean you've there? to done pickup sourcing and mean has a what it's estate, real has in? Has just Or new in, And of became I just definitely it you're the sense. something staying sites that Sherry, has stores seen I that resources put a happened. been you there have resource? there I that guess, like -- on

Sherry Bahrambeygui

makes potentially seeing markets for so even more and I sense markets outside going open that think that credit team could take to into this to commitment, secondary much renewed and it's energy, existing renewed of energy. for challenged, still have concept say can't they're is lagging about in this the -- discussions. The of be on fact area us we're momentum be being sense There a is forward saturating an we considering focus, bit are a that real continue a do our markets. to markets it of doors forward. it have the we in there are us, other market that a hoping can we're our seemed with excited And if is -- build markets. anymore the terms economic there express being is not that for existing And expand I can and us momentum other concern there is to a so. for and business renewed it, we than is people There where

there has I'd energy, the efforts renewed that we a been, our a renewed that's this leadership order provide will in motivation. needed commitment support And So in the say, from expedite yes, to area.

Thomas Vester

Yes.

in of capital Okay. more the to returns all return mean guess, But the up targets rules in been not one real of for I you mean, that in for others. more ways not that the anyways, terms return you because feel mentioned key you estate convert to whether been of to is clearly it. has I just that? do with And your have do pay also feel follow you case? your Or or compromise you to to -- it on sort have of does Do aspect

Sherry Bahrambeygui

said. you catch I'm the sorry, didn't last of part what

Another...

Thomas Vester

way some quickly. compromise have basically pretty not on in real you can them, of sites get a Because basically you the that paying one bit estate to feel is up? you whether to Basically, or secure

Sherry Bahrambeygui

the standards, that tell rigor compromising that's sale. mean, get we've committee we'll We've if a make we're of overpay, active no, sure I the of approved. to we're a by and our don't applied very to virtue it. we paying will lot we putting that relative of so that's expect -- Board. our real And not got way there's Well. have got for the meet that -- return we own of this that another thresholds be at I point, before estate club have we internal a internal can to you, thresholds

Maarten Jager

we income some But look the this incremental of the it. at MBVs. expect, We financials, look Sherry to just and of areas mean that calls, the are process. incremental to that are ROI, I ROI, new that, value, an we All very and include add membership actually it determine include I team at financial we management said, and to making lenses it are we from way judicially from it going a those expensive is, in then, some Yes. get whether will prior projects addressed to looking. We sales would use I adjusted the to they on of lenses as think rigorous I've shareholder basis. sure that something different they course, Yes, are and evaluate more on any you think, enough value add different include projects. all

Sherry Bahrambeygui

where we're tailored we markets clubs see I depending in precise to bit little the more doing them. the to putting little add bit a be potentially of our the So opportunity formats to -- more mean and on a here be this, nimble to and

if it because us, can in club expect that to you exists. for paying the Bogotá, be fertile the of for a opportunity So that, going think more but another we're going to is have we to that very expect which we're justify returns we market

-- with to expect don't in And opportunities markets that assuming aggressively But basis. we tandem with into that only have looking very I so still we're continues as we're doing be that efforts looking secondary impression we're out going we're it that looking in a prove want to. pursuing, Bogotá to it this to we Veraguas case-by-case and expand markets, but an our we to like only lower markets, conversation leave fertile we're to are secondary on -- at to

Thomas Vester

Yes.

definitely appreciated. That's Okay.

done there -- should how -- to in head, some if on and I'm I Maarten, me the something understand for forward. Just, also if missing a looking the But there. lower working corporate in is if maybe tax maybe rates mean various operate going my corporate capital, the intuitively, why the hard room U.S, what help I corporate there again, -- tax tax it's PriceSmart you mean, But be at rate the in rates the you've appreciated. little bit to tax, jurisdictions and also the on

Maarten Jager

we tax very very little have is where States that liability I here. the liability -- and right? little is overwhelming have the of tax We -- in majority -- principally generate liability generated we operate, the out income in think United liability tax markets the our markets the the

business rate be know, of significantly, corporate in markets we like of being what -- them the this or you tax in making, year. and that a Aeropost as rate some of of balance have to don't always the are our investments a for we're losses income of as those. had and reported there all are the losses, the in to tax As foreign what the U.S. reform, offset whole tax U.S, evaluate declined credits that, from optimize than forward. the our kind And cycling revalued, at our we to U.S. of generate but result example, had to and through to right? relook now I'd said I those we've and judicious as way, we to think looking lower. in upside at because going in capabilities, down that's Having of in shift, being to omnichannel that our higher are And tax mean here turned we'll -- kind it is that

rate. so tax But we that and a of And looking effectively tax that has our mathematically at the have. the are we raising impact overall may question opportunities

Operator

question Charlie from of last comes Our Ceredex. Carter

Charles Carter

ones. two Just quick

to the back believe last going just June lot on disrupted by America was a is first political of sales The same-store Central If number. unrest. I year, --

the a of So your we've I by you Maarten, seen was sort wanted that's generally to driving It broad-based voice like, of double not check that a month-to-month. improvement doesn't improvement. sounded sort that the tone it encouraged of -- were of that kind

Nicaragua to easy that margins? for quarter coming? or specifics new one that's comp it in already just might very Costa can't of that not what on that want its again, And your distribution center remember the lastly, Rica. if on if launched I a in And was just effect any just I the just So so make have was neighbors. sure

Maarten Jager

Costa about talk Rica. Sherry have I'll

we of comps, In have good we question. the -- And a markets. XX do terms have

So it's us. never There's a one kind are market of helping number story. of consistent that

It But ago. helping this on little a unrest ago, was markets still not lapping comp specifically turnaround. it's year us whole that year significant in that's drag the has flatter. Nicaragua June are Some a helped year. are and we because our a a

Sherry Bahrambeygui

in issues And also, other like we going in have Honduras. other direction

very riots, alert and ready we've getting difficult mass our pre a even keep our safe. to members down and with a the with on is to times clubs employees few situation certainly our closures, that's the been there So close

So have year. last we didn't that this we that's a year challenge new have

dynamic. it's So

Maarten Jager

in And Costa Rica?

Sherry Bahrambeygui

RDC. Rica I'm sorry in Costa

or Europe Costa just actually And vendor clubs. is have to to specific example, a for competitive example, cost-effective is Rica, savings net redirect would to from one to addition even go manner or be to most an get getting Miami on us now in allow and to our to either merchandise, to that's sell can to what And most opposed us then very see that closer study as of Asia at that sell the markets. by members to for and having from is have a cost Rica landed So year, virtue, is look that to Costa Rica the be merchandise going clubs. improved our to cost-effective opportunity to by to or possible in-depth and for in able as the that item items to being practice directly in there the business of manner the then be largest Costa a allow cost it as that potentially through we that Miami and countries looking

Rica Costa what then out inventory And or yield of shorter-term with will levels when the it stocks knowledge to that of RDC of pulse real terms savings, it a and those merchandise are sales able and and the clubs basis better we in on each needs optimally. better clubs, are will sales time into aggregate of the yield less in in activities

unrest, optionality important. there for and but a Rica in Dynamics I on is reliability our flexibility it's that a what to But in business supply standpoint, is Costa chain we've tariffs, merchandise achieved and company, optionality almost that world, potential By standpoint, from changes. having items-by-items analysis as is where So there responsible, a is go part. work terms it financial is are smart political RDC just best changing additional our and Stepping standpoint. back frankly require move of what we've for to the law and of in-depth that potential. needs achieved moment, is for studying But the in Costa still Rica Costa a float. Rica of hosts that with which I there a very the it's a lot Not it company, process that RDC though an from on basis think RDC think tax to for does the from how into the maximize us. with

it. to Now us it's to make the of up most

Charles Carter

time, of that's I then issue, Miami tariff the are and guess, quick into imported but your just we anything X on are just know [indiscernible] stores? I rerouted you the out to -- running to And follow-up,

Sherry Bahrambeygui

We zone have a free trade definitive... but you I with there, can't tell

Maarten Jager

those. get merchandise from are There -- that and gives and some that through Well. free zones goes China that trade we

that tariffs, not is that's that that from another been but we there came to buy subject to merchandise subject supplier tariffs. from in China turn U.S. So has

of that sense? focusing Does And that part addressing. it's on we really it that make so are

Charles Carter

Yes, it does. But I it at I'm competitively. looking guess

on you the that they the competing product-by-product would anybody buying So with are same as or SKU-by-SKU, be U.S. well. from

through So the U.S. it's disadvantaged you're not as ways? be by because you in if sourcing some tariffs would

Maarten Jager

we competitively think we as value merchandise lenses for but that's the with and leverage member that possible, of are trying zones of supply looking trade our flowing the chain on including course, have. right, effectively ways to that alternative I free as

Sherry Bahrambeygui

RDC Costa that allows to And extent that that that. us Yes. that that Rica merchandise avoid and is in by tariff having bias more there doing sort of do favor that that effectively. to the we can altogether obviously, And

Maarten Jager

Okay. Thank you very there don't much. queue? I in are more the think Operator, questions any

Operator

our This time, to this turn remarks. That team question-and-answer the is closing session. At management to like correct. back concludes over any for conference would

Sherry Bahrambeygui

all prospects forward. the morning. very you thank excited for say time to like just We're us about this I'd for your moving

committed to Have employees members, good behalf We our, ultimately a are all very hard and our working on our day. shareholders. of

Maarten Jager

Thank you.

Operator

attending concluded. today's The presentation. Thank now for you conference has

may disconnect. now You

PriceSmart (PSMT) 11 Jul 192019 Q3 Earnings call transcript