- Net Merchandise Sales: $1.2 billion for Q3 FY2024, increased by 11.6% (9.1% in constant currency).
- Total Revenue: Over $1.2 billion for Q3 FY2024.
- Comparable Net Merchandise Sales: Increased by 7.8% (5.6% in constant currency) for Q3 FY2024.
- Gross Margin: Increased 30 basis points to 15.6% for Q3 FY2024.
- Operating Income: $49.9 million for Q3 FY2024, increased by 15.9% from the same period last year.
- Net Income: $32.5 million or $1.8 per diluted share for Q3 FY2024.
- Adjusted EBITDA: $71 million for Q3 FY2024, compared to $63.9 million in the same period last year.
- Membership Accounts: Grew 4.8% to almost 1.9 million accounts with a 12-month renewal rate of 88.1% as of May 31st, 2024.
- Membership Income: $19.3 million for Q3 FY2024, an increase of 15.2% over the same period last year.
- Cash, Cash Equivalents, and Restricted Cash: $140.3 million as of the end of Q3 FY2024.
- Short-term Investments: Approximately $99.9 million as of the end of Q3 FY2024.
- Net Cash Provided by Operating Activities: $165.8 million for the first nine months of FY2024.
- Net Cash Used in Investing Activities: Decreased by $48.4 million for the first nine months of FY2024.
- Net Cash Used in Financing Activities: Increased by $111.2 million for the first nine months of FY2024.
- New Store Openings: Sixth warehouse club in Guatemala and fourth warehouse club in El Salvador opened during FY2024.
- Digital Channel Sales: Increased 27% for Q3 FY2024, representing 5.5% of total net merchandise sales.
Release Date: July 11, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Net merchandise sales increased by 11.6% year-over-year, reaching almost $1.2 billion for the quarter.
- Membership accounts grew by 4.8% to almost 1.9 million, with a strong 12-month renewal rate of 88.1%.
- Gross margin as a percentage of net merchandise sales increased by 30 basis points to 15.6%.
- Adjusted EBITDA for the third quarter was $71 million, up from $63.9 million in the same period last year.
- The company continues to expand its footprint, with plans to open a ninth warehouse club in Costa Rica and ongoing remodeling of high-volume clubs.
Negative Points
- Total SG&A expenses increased to 13% of total revenues, up from 12.9% in the same quarter last year.
- General and administrative expenses increased to 3.3% of total revenue, primarily due to higher compensation and professional fees.
- The effective tax rate for the third quarter increased to 30.8% from 28.9% a year ago.
- Net cash provided by operating activities decreased to $165.8 million for the first nine months, down from $184.7 million in the same period last year.
- The company recorded a $2.9 million net loss in total other expense, compared to a $1.5 million net loss in the same period last year.
Q & A Highlights
Q: Most recently, the Colombian currency has weakened quite a bit. Have you seen any change in consumer behavior in Colombia? And have you made any changes in pricing like you did maybe a year and a half ago?
A: Robert Price, Interim CEO: The Colombian currency has been around 3,900 to 4,000 for a while now, which is what we expected. It hasn't significantly impacted our pricing strategy. We feel positive about the current exchange rate as it has made imports slightly more favorable.
Q: When you think about the additions and expansions at your existing stores, how much of a square foot increase is that in terms of room?
A: Robert Price, Interim CEO: We estimate about a 15% to 20% increase in sales floor space. This expansion allows us to display products better, improve efficiency, and present a more compelling value to our members.
Q: What kind of new merchandise do you add when you expand these facilities?
A: Robert Price, Interim CEO: It's not necessarily about adding more SKUs. The expansion allows us to display products with better facing, improving the impact of each item and reducing labor related to stocking and handling. This enhances efficiency and presents a more compelling value to members.
Q: Can you provide more details on the impact of your digital channels on sales?
A: Michael McCleary, CFO: Total net merchandise sales through digital channels increased 27% versus the same period in the prior year, representing a record $65.9 million or 5.5% of total net merchandise sales. Total orders placed on PriceSmart.com and our app increased 21.9%, with the average transaction value increasing by 2.6%.
Q: How is the membership growth and renewal rate performing?
A: Michael McCleary, CFO: Membership accounts grew 4.8% versus the prior year to almost 1.9 million accounts, with a strong 12-month renewal rate of 88.1% as of May 31, 2024. Our Platinum membership program has been particularly successful, ending the quarter at 11% of our total membership base.
Q: What are the key drivers behind the increase in gross margin?
A: Michael McCleary, CFO: The gross margin for the third quarter of fiscal year 2024 increased by 30 basis points to 15.6%, primarily due to general margin improvement across most sales categories. In total dollars, the gross margin increased by $22.2 million or approximately 13.5% versus the same quarter of the prior fiscal year.
Q: Can you elaborate on the company's real estate expansion plans?
A: Michael McCleary, CFO: We have purchased land and plan to open our ninth warehouse club in Costa Rica, anticipated to open in spring 2025. We are also remodeling several high-volume clubs and expanding clubs in San Salvador, El Salvador, Liberia, Costa Rica, and Port of Spain, Trinidad and Tobago.
Q: How are the company's environmental and social responsibility initiatives progressing?
A: Michael McCleary, CFO: We released our comprehensive environmental and social responsibility report for fiscal year 2023. We currently have seven recycling centers open and plan to expand this program by opening four additional centers in the Dominican Republic during fiscal year 2025.
Q: What are the future projections for the company's effective tax rate?
A: Michael McCleary, CFO: For the nine months ended May 31, 2024, the effective tax rate was 31.3% compared to 32.2% for the prior year period. We expect to end the fiscal year with an annualized effective tax rate of about 31% to 32%.
Q: How is the company's balance sheet and cash flow situation?
A: Michael McCleary, CFO: We ended the quarter with cash, cash equivalents, and restricted cash totaling $140.3 million, in addition to approximately $99.9 million of short-term investments. Net cash provided by operating activities totaled $165.8 million for the first nine months of fiscal year 2024.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
