PriceSmart Incorporated is looking to remodel and expand four of its high-volume clubs after coming off a record third quarter which saw revenue climb to US$1.10 billion ($168.19 billion) from its 51 clubs across 13 territories.

The international membership shopping warehouse club is set to have 54 clubs by early 2024 once the new locations in Colombia, Guatemala, and El Salvador are opened. Ahead of these new openings, the company is seeking to enhance sales and profitability by expanding the size of its warehouse clubs and number of parking spaces along with opening new distribution centres across Latin America and the Caribbean.

Thus, it will be remodelling clubs in San Salvador, El Salvador; Port of Spain, Trinidad and Tobago; San Pedro Sula in Honduras; and Santiago in the Dominican Republic. This is on top of PriceSmart relocating its domestic distribution in Panama on June 5. Panama will also see an additional five pharmacy centres in the 2024 financial year (FY), while an additional eight audiology centres are to be opened across the region in the new FY. A produce centre is also planned for Trinidad to complement those in other large markets, excluding Jamaica.

These moves have translated positively for the company’s earnings as its net merchandise sales grew seven per cent to US$1.07 billion for the third quarter, with 4.9 per cent of those sales derived from omnichannel routes. Omnichannel represents sales from digital channels like the mobile application and desktop website.

While total expenses increased to US$1.05 billion from higher warehouse and administrative expenses, operating income improved 28 per cent to US$43.05 million. After accounting for lower other expenses and income taxes, net profit rose 54 per cent to US$29.57 million ($4.54 billion), with earnings per share (EPS) at US$0.95. However, after removing a one-off value-added tax receivable write-off, the adjusted net profit was US$31.88 million with EPS at US$1.02, US$0.02 below analyst estimates.

With a focus on growth, PriceSmart has put increased membership value and digital and technological capabilities at the front of its priorities. This will be achieved via increased benefits related to membership, which include an expanded Member’s Selection private label offering, the ability to do all transactions digitally, and expansion of its well-being initiative with audiology, optical, and pharmacy services. The digital initiative is meant to use data to inform decisions surrounding the potential viability of new clubs while understanding what incremental products and services can be offered.

This initiative has borne fruit with 58.6 per cent of its 1.79 million members having an online profile on its website and 15 per cent of its members making a purchase there. It has also resulted in 9.5 per cent of members setting up auto renewal of membership, which brought in US$16.74 million in the third quarter.

Despite all these positive moves, PriceSmart still faces hurdles in certain regional markets related to the ability to convert from local currency to United States dollars (USD). The club has experienced difficulties in Trinidad and Tobago since 2017 to source sufficient levels of tradable currencies, which resulted in the country having at one point a Trinidad and Tobago dollar (TTD) equivalent of US$100.5 million in November 2020. While this declined to about US$13.5 million at the end of May, PriceSmart still experienced US$1.1 million and US$3.8 million in transaction costs for the third quarter and nine months, respectively, related to converting TTD into euros or Canadian dollars before converting them to USD.

The situation got more dynamic recently when the Honduran central bank began to limit and control the allocation of USD for conversion from the Honduran Lempiras (HNL). This has resulted in an HNL equivalent of US$15.9 million, which cannot be readily converted into USD.

“Well, this is kind of new to this quarter, so we’re monitoring it actively. Obviously, you can see… the numbers that we disclosed about the cash on hand is not near as extreme as it got to at one point in Trinidad, but we did think it was important to call it out. We haven’t taken any actions to restrict the flow of merchandise at this point, and we’re just working with the banks and the local officials to continue to monitor this, and we’ll see as we go forward,” said PriceSmart Chief Financial Officer Michael McCleary on the earnings call on Tuesday.

While comparable sales in Jamaica went down by 3.8 per cent for the nine months due to sales transfers between the two clubs, the appreciation of the Jamaican dollar and Costa Rica colón against the USD resulted in higher warehouse and other operational expenses in Q3.

For the overall nine months, PriceSmart’s revenue is up eight per cent to US$3.29 billion with net profit climbing by 15 per cent to US$93.82 million which resulted in an EPS of $3.02. The adjusted net profit for the period was US$103.33 million with an adjusted EPS of US$3.32. These earnings slightly trail the 2022 FY when the company earned US$4.07 billion in revenue and US$104.53 million in net profit.

Total assets are up seven per cent to US$1.93 billion, with cash and cash equivalents of US$222.67 million. Total liabilities and shareholders’ equity stood at US$843.65 million and US$1.09 billion, respectively.

Despite this improved performance, PriceSmart traded down in after hours on Monday, July 10 before hitting a new 52-week high of US$82 the following day. The stock price subsequently traded down to US$76.60 on Thursday, July 13 with a market capitalisation of US$2.30 billion. PriceSmart has announced a US$75 million stock buy-back programme to be repurchased on the open market on a discretionary basis.

“But the other thing in my mind is, it is certainly a learning experience because we really don’t know how this is going to work until it’s out there. But the other thing is, we’re a very thinly traded stock and what’s been the pattern is that we release earnings. And then when it’s good, the stock jumps up for a few days. And then it goes back down, and then we’re back in this kind of pattern where there isn’t much going on. And I think that by having the stock repurchase programme in place, we can provide a little more stability and put some kind of a little more — well I guess it would be stability-into the pricing in the stock because we are an unusual company,” said founder, chairman, and interim Chief Executive Officer Robert E Price.