PSMT - Earnings call transcript Q1 2020

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Operator

Good day, and welcome to the First Quarter FY '20 Financial Results Conference Call. [Operator Instructions]

I'd now like to turn the conference over to Mr. Michael McCleary, Senior Vice President and Interim Chief Financial Officer. Please go ahead.

Michael McCleary

to fiscal earnings year welcome first for and of quarter XXXX. you, the call PriceSmart the Thank

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

both find new our where on at for email Investor sign can also documents up website alerts. investors.pricesmart.com can You Relations you

related statements of As matters. and plans, of historical statements call other a than future are statements reminder, all forward-looking XX, assumptions anticipated are All statements concerning forward-looking based made revenues expectations Company's on and today, this conference current XXXX. the fact, on January as

Form and but Forward-looking that results actual The differ estimate Report XXXX, include words Exchange similar could the the this expect, materially, XXXX. to, will, to XX, as risks on detailed including are no statements statements call. the made risks with during statements forward-looking and year XX, containing are Commission the filed the Company's in XX-K uncertainties not Securities and obligation to limited Company ended statements October August update expressions. cause should, may, for These the believe, Annual to undertakes subject on fiscal

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

Sherry Bahrambeygui

Thanks, for Year. day, and Thank Michael. Good joining Happy New everyone, you today's call.

lead results this during Michael's to Michael's of this with him Chief Officer appreciative working who Financial step confident XXXX, our capacity. the I'd heard to Interim this our finance I'm stage. and I'm in like to for very period, year reviewing QX fiscal enjoying up you you Before McCleary, to in team formally ability I'm Michael introduce willingness from. during just

and with Controller promoted knowledge of is We're as joined and Michael Corporate to and and was President Controller. looking forward Senior PriceSmart's reporting team He previously Company Vice strong the in corporate Michael quite working Vice members. Board processes of to all interim role. he all business, a Corporate PriceSmart's and financial and governance, As and later has finance in this President to shared, familiar aspects XXXX our

we on my focus renewed call Six first On spoke Rights. our about The

continues our experience Our Six to providing lowest an The focus Rights outstanding members by drive our of quality and with business prices. our on services at forward shopping mission Merchandising and the to efforts

results are and our This, and along we high with our continue employees over to which believe momentum. standards who team operate, positive their QX for efforts and commitment to XXXX year, for that our XXXX. communities the report our results and And are fiscal our apart. we're we are us solid on to starting to pleased finish and Based we financial the the set past results, proud of define for FY to we show well I'm QX positioned in XXXX.

revenue of million, as In million period. the primarily first year merchandise well income. of as million QX record sales $XX.X quarter revenue $X.X membership of plus increase other an we consisted Revenues of the million export and $XXX.X sales X.X% over had $XXX.X $XX.X million and prior of of income of net comparable

sales Comparable a with X%, months merchandise Currency fluctuations had increased than more net comparable net currency fluctuations of affecting negative open XX.X by in on X.X% net clubs sales XX by sales. our impact merchandise X.X%. merchandise negatively

grocery with in pet strong supplies, overall performance and merchandise departments. our deli In in we our foods fresh sales category terms and increase of saw highlights, categories,

home electronics, positive hardware yield departments categories, and such that results to furnishing. to as continue we is sales Although recognize opportunity still these there improve in

in with sales X.X% me So at a now by color give increase clubs sales. comparable more let had merchandise grew segments. In Central America, you XX we where X.X% quarter-end,

sales X.X% growth to were American sales X.X% led Salvador the contributing currency positive over the strong segment. to the low Central comparable impact this same-store reporting segment, sales El growth segment in double in comparable The the and digits, and way and Nicaragua on respectively. the half of in total of

comparable In of growth store sales Jamaica double negative where sales the in X.X%. segment, growth. total the segment led sales and Caribbean currency Caribbean, we X.X% respectively. way low the had impact with grew at reporting quarter-end, and clubs the sales on of digit X.X% XX merchandise same to The comparable X.X%, were

comparable In dollars greatest the quarter-end sales declined Colombia, U.S. where X%, and decrease we U.S. had with in X.X% dollars. impact, seven in merchandise clubs sales currency in a at

and Colombia However, X.X% of growth solid The on constant in a respectively. comparable in sales have impact was in currency Colombia. we and sales X.X% negative currency total

prior QX year from period. a the XXXX month XX of rate membership at increase end which Membership was accounts, of fiscal renewal at QX XXXX. XX% income an the with With compared X.X% the ago. results, overall regard comparable The up finished quarter November end XX.X% is basis a at point time XX of the fiscal the XX.X%, was year same million we to and since to approximately X.X increase

and margins period primarily for with the more fiscal Net impacted net Total in merchandise compared increased XX XX.X% QX this basis XX.X% versus is favorable year a trends. to margin prior-year was from to by period gross XX.X% QX increased when margins historical the line same Gross in points quarter margins. to XXXX. merchandise ago

or comparable year per Net $XX.X compared XXXX $XX.X or million increased the share last per share quarter period $X.XX fiscal first XX% in year. income for $X.XX million to of to the

warehouse November of and clubs San that ago. ended a in opened Cristobal two XX Bolivar Republic, this Club to in as include The year the the recently referred to Veraguas XX Club; the in compared and most Guatemala, Metropark; XXXX. one clubs Panama with in quarter clubs Dominican new We

the located several our of participating opening Guatemala, Club, of clubs in including City, which I of November the the Guatemala had Cristobal in in of side San southwestern pleasure visiting the Guatemala. is

is have open clubs this country. are year. XXth Club the Company's first additional in in Cristobal our scheduled smaller and and utilize format Cristobal fourth to San to we San calendar warehouse The PriceSmart's club that club is Guatemala the club warehouse that four

like openings. Now and comparable number moment current I'd take to the of and a given sales, address expected, club

clubs clubs addition XXXX calendar four clubs, the term. the member to announced likely addition four transfer the upcoming new As before, of urban to some We especially in mature that believe more new clubs the I've the in these improves existing environments year are densely near for from sales mentioned experience. in populated

been employees, Our investments have members, and and priorities for are our and long-term and sustainable to value established vendors shareholders. create

which are additional importance in to existing leverage these our clubs increasing our recognize to of is though enhance presence reasonably some close and allow convenience and offer infrastructure members. these So, clubs, us also branding, markets of proximity within of these our we more

competitor reopened factor sales An severe in after to one expect we closed damage due year additional markets September is being recently at on least Caribbean comparable in of that this an our storm where a XXXX. of impact

In initiatives of all operate. our new some PriceSmart.com digital capability in remain the working expand XXXX, In the upgrades we include in platform. fiscal renewals Republic. launched So in now, a Dominican at visible countries offering countries launched they the where to clubs focused, and XXXX Spanish-speaking online digital membership we look making our club fiscal to we're we of for sign-ups, and inventory on

fiscal be purchases make during delivery options. XXXX able We pickup with multiple online PriceSmart.com also on that to in and markets members expect our select will

items online the individual also As certain to ability and for collect use their club and part members on to of shop at that effort, business we're working locations.

Companywide, rolled of in adding seven the our we and the terms XX additional clubs. of out fiscal we of Thus In by of to inside we've to enhancing member strengthen clubs, expediting continue services throughout XXXX, services our out far many experience to are service this portfolio most bringing plans service clubs. our to roll optical centers, optical our total

merchandise and we've inventory work management. on continue our year, last offering the and Over to been

the As penetration quarter in increased year versus an fresh a example, the first category ago.

The our developing we offerings mainly our is focus still program good our farm is several there. see and in expanding results but encouraging foods also farm on on stages, by increase program. direct This potential is showing prepared driven early levels direct and

values, relationships local with reduce our produce program opportunity provide and and increase out currency We our their gives members and our with selections, communities. local produce farmers of transact believe the this strengthen our local at us in fresher better empower meanwhile to stocks,

We to remain exciting to sales safe place and expansions where floor keep a and and up we our Last remodels making work to date hard our We needed. clubs clubs. when positive shop. clubs year committed by two and to investing in expanded

preparation improved added In parking clubs. addition, food canopies as and well panels lot and fresh various to we areas as solar

and expand approximately enjoyable to experience. plans additional ensure clubs refreshing to have three have an we our several XXXX, members shopping and clubs anticipate compelling year calendar In

good and compensation employees commitments Another XXXX investing our priority them includes by our providing for benefits. and with in their development to

build clubs as is possible as growth our that provide we our pursuing deliver for opportunities Merchandising on ability staff to our are with because who short can mission succession. cross-function our support well-versed we to long-term of our talented and are well employees. our to of We example, group Rights programs experienced employees The rotational in only Six pipeline collaboration, of dedicated strengthen new and recognize employees and ensure for For

a conjunction understand also Philanthropies, as students school very communities 'XX We program. more operate. it We with fiscal positive in school Crecer's Crecer we communities. with the provided proud see the year developing are than alone, responsibility importance the in influence y of be supply to Aprender Price y of which In Aprender we our supporting In and XXX,XXX our supplies.

an FX turn that of Net $XXX.X in in merchandise the X.X% Company. negative the were million, earlier or impact about I $X.X December represented ago, with history X.X% want sales to to a this I sales Net monthly talk call highest of we our merchandise Before sales briefly released versus a of December over the week. record increase a year Michael, million. sales

new on we openings, providing and sales by a remain focused membership of service balance value driving our members. comparable outstanding closing, increasing to club warehouse through growth store In and

on we success drive initiatives will will continue believe the long-term also and toward to shareholder that We increased value. Company focus

their team. that past a progress continued hard year. drive on during Most to working positive want impact intense having our healthy, while this sustainable growth, We our forward a look important importantly, and core We've made for employees to engagement thank their markets. strategies the I commitment in as

with now turn the call Thank share to I information will today. to this over for you you opportunity Michael. the

Michael McCleary

CFO. growth great Sherry, rest I call leading the continue goals. and our forward Interim conference long-term for look to to team to we you, good transitional period, of our as implement Thank first everyone during profitability support finance as or organization this and to afternoon my the morning

when discussed As fiscal million, basis Sherry of points, the margins XX increase earlier, first quarter rose of fiscal to and $XXX.X both gross XXXX. were an of XXXX first total revenues compared during the X.X%, quarter

percentage as a expenses revenue was remaining total XX.X%, ago. SG&A of versus year a Total flat

million $X.X a one-time However, related departure point comparable a CEO, period. charge our fiscal total year impact which XXXX SG&A former XX represented our to QX basis that the included of in

was related after this including in The investments our by the and preopening impact opening new the prior increase to of year-over-year period our primarily clubs, one-time considering four expenses. talent driven expenses in

$XX.X or XXXX. versus revenue revenues of Operating is income in QX The of million in due million year first XXXX was net or fiscal fiscal ago. margins improvement X.X% $XX.X merchandising of largely to total X.X% higher the a quarter total

acquisition. Below comparing expense, year income to $X.X received The QX offset other escrow related primarily current year $X.X when of total $XXX,XXX Aeropost million losses period. FX related the prior a for settlement by balances the year this decreased our million of to to credit to the partially losses, operating line, were from

Our effective versus a tax fiscal year for a quarter ago. XX.X% XXXX the of rate rate XX.X% first of was

an rates fiscal may rate forecast in events in tax year specific those range. the effective XXXX to continues current our full quarterly of on our XX% to vary for the for be based While XX% quarters,

to share in per Net diluted first income XXXX compared related diluted of in last with increased to of quarter to XX% share $XX.X $XX.X included former $X.XX earnings of the $X.XX per CEO. a of the first our quarter with of million departure million, fiscal charge $X.XX which year earnings the

$XX.X million, period year. $XXX.X remains very and same strong. ended last with on increase equivalents which cash, compared of quarter to cash the to million restricted balance cash the the an sheet of We Moving

basis. inventory period the offset operating by four quarter same our opened average inventory on last a holiday by and in this club partially additional this was During earlier the year, from million over cash last activities decreased year year, clubs inventory an improvements provided which primarily increase $X.X the due versus the buildup to per of

and on increases long-term Net activities cash Colombia used by investing $XX.X short-term net activities provided primarily million, to new by in million in by investments. our facilities. $XX.X increased of to million, increased primarily Net temporary draw-downs cash short-term borrowings $XX.X due financing due credit

this new a technical accounting we the standard. On quarter more note, adopted lease

value lease for lease we our expected liabilities a $XXX a minimum operating net present of million future of leases. representing the recorded As result, commitments

have income, to that this direct countries recorded liabilities is lease other It basis Therefore, in a in currency $XX are in on dollar note we've important dollar exchange of as did in U.S. million not for these impact revalued while change fluctuations the between denominated our these net operate currencies. are a go-forward on currencies and impact local P&L could quarterly. U.S. the which rate leases the our liabilities

of closing, one we our total clubs four and experience our over in XX have member year, In past additional XXXX. by that we the improved territory clubs bring growth end and to new excited we will are have clubs XX countries and U.S. about the adding reaccelerated the in the four by the pipeline

our Six our experience, is membership renewal improved shopping resulting improved is that in renewed The Rights merchandise assortments rates. on members' and driving believe We focus enhancing

our We XXXX by results quarter. are look forward reporting start and encouraged fiscal to our next to

Operator, it I turn will back now you. to

Operator

Instructions] comes [Operator first The ahead. Jon City from Capital. go Please of Kansas Braatz question

Jon Braatz

Sherry, couple just of a questions.

and said, back you levels. approaching as to Your have been margins gross historic improving,

some improve do the and the As to you you point you to your back of get do see what returning at you're Once that other back begin customer? gross look where customers? opportunities point you to margins, some levels, that to to consumer, improvement you returning historic your begin forward of

Sherry Bahrambeygui

fundamental inefficiencies very that to we value, members. our we our discipline a compelling provide familiar John, such business, attempt can all Well, as out great the squeeze to value a you're with of

sell volume And to so give prices better we and such can lower our tight range very we and to through margins value purchase better getting to our members. compelling try better a maintain at driving pricing then to at that a opportunity by within that we can back basically members more that merchandise

possible. So indeed, our margins compress is discipline to much as as

and and the margin so offer the category members given compelling we of our given goods each in that our structure that offer of structure we to services cost circumstances, terms prices in increase that of members all most type memberships. possible Given the to the we the our order have for can both appropriate value

short, does in So yes, to back the member. it go

Jon Braatz

necessarily in So to to returning at be some that then see those now, levels we're point, at and - customers? much additional would improvement begin it historical your really it margins, difficult you of

Sherry Bahrambeygui

to to hesitate But that. speaking, to give volume, generally to the goal yes. benefit I blanket is answer back our a give drive to the members

Jon Braatz

given trying Aeropost of you Then is bottom you you've in has maybe give to secondly, like maybe it last that. like last us few forward? and the I'm something in - spending us last line, little on that I how costing and see the that XX-Q, and relative quarter past sense can it or little and a $X.XX see and that total your to a I going didn't had or the year think you and what update spending spending was impact $X.XX quarters, your quarter the online

Sherry Bahrambeygui

material share deviation What talent building investing the you it's in with with line resources capabilities. support and in the of we don't any near you. have our to But fund I I sure we been. what business have that And with generally it's can are appropriate making term, obviously to share in and the online objectives is,

I can... think you

Jon Braatz

Okay.

Sherry Bahrambeygui

where again, line appropriate making in can as we You need. But investments see the with we're we've been.

Jon Braatz

to Are with XXXX? you XXXX ease When investments spending you somewhat? rather anticipate those might off do be we to bit talking those you or a seeing little be what tail in expect consistent maybe levels would and

Sherry Bahrambeygui

tell future, for what necessarily that the is the process is you is robust dynamic I can I share this or - that All and platform capabilities additional include, would a you been building investment digital is a near pretty and e-commerce it requires, intend in tail with potentially require you we've to can't it there when I much you that tell even are line more spending. that the at What investing not can with point. we off more

to and is and we're we commitment methodical it are as to going we're investments the it that we're in we're to going do and reasonably do that go. the way, again, make this platform, right responsible going to and But going build required a

Jon Braatz

And one last question, Sherry.

of might couple add to stores be positive small you're Anything a a learning? those open were format negative? stores had your what period on for You've time. that of you learned maybe from Anything either or short able you've unexpected,

Sherry Bahrambeygui

of in falling are potential not in the can of and or what been exceeding we scrutinizing have clubs actively But the clubs long. expectations short we've where - consider currently not these stores We been most process this we are using future the learned lessons of these be from been because open of these been open process very seeing we've as clubs, and performance format. where that expectations have

as were a fresh allows at that different a trying see example, for the club to well. we more in more even to a format, it's about, market what remote works Veraguas, we're in to So, very lot which in was very work that and experimental small a has where a us that in being attributes doesn't what our expand reach of different membership. it's allows things it's upfront that club, is secondary - - of a us a location though Bolivar,

that where right of to we're now any new and signs on we're different It's areas from further comment we from though. process as relatively me the And positive for in able that but well. some improve But can learning it, be seeing lessons to also it. studying

Operator

over now conference McCleary I'd session. Mr. like This Michael back for turn any Instructions] remarks. our to question-and-answer [Operator to closing concludes the

Michael McCleary

and talking everybody, quarter. forward you, you to we look Thank next to Okay.

Sherry Bahrambeygui

Bye-bye. everyone. Thanks,

Operator

you today’s presentation. Thank attending concluded. now is for Conference

disconnect. may You now

PriceSmart (PSMT) 10 Jan 202020 Q1 Earnings call transcript