In This Article:
Release Date: January 10, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Net merchandise sales for the first quarter increased by 7.8% or 8.2% in constant currency, indicating strong sales growth.
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Membership accounts grew by 4.8% compared to the prior year, reaching over 1.9 million accounts with a high renewal rate of 87.8%.
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The private label brand, Member Selection, represented 27.7% of total merchandise sales, showing a 50 basis point increase from the previous year.
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Digital channel sales increased by 21.1% compared to the same period last year, reaching a record high of $69.4 million.
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Investments in technology and distribution infrastructure are expected to enhance operational efficiency and sales growth in the future.
Negative Points
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Total gross margin for the first quarter decreased by 20 basis points to 15.9% compared to the previous year.
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Net income for the first quarter was slightly lower at $37.4 million compared to $38 million in the same period last year.
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Currency conversion costs increased, impacting financial results, with a $3.4 million expense noted in the quarter.
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Cash flow from operating activities decreased to $38.5 million from $41.1 million in the prior year, partly due to shifts in working capital.
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Challenges in converting local currency to US dollars in certain markets, such as Trinidad and Honduras, limit financial flexibility.
Q & A Highlights
Q: Can you explain the currency conversion costs and whether only Honduras currencies were converted during the quarter? A: Michael McCleary, CFO, clarified that both Trinidad and Honduras currencies were converted. However, more local currency was generated in Trinidad than could be converted, leading to the observed balances.
Q: What is the future of the export business, especially after losing the Philippines market? A: Robert Price, Interim CEO, stated that the export business will not go to zero. A new division focused on export sales has been established, targeting countries without PriceSmart operations. The company is working with new customers and developing agreements to grow this segment.
Q: What are the goals for the private label business, and how much can it grow? A: Robert Price, Interim CEO, emphasized the value of the Member Selection brand, which is in demand, especially in export markets. While they haven't set a specific target as a percentage of total sales, there is significant potential for growth without eliminating too many branded products.
Q: Can you provide more details on the increase in cost of goods sold (COGS) as a percentage of sales? A: Michael McCleary, CFO, explained that the increase was primarily due to aggressive pricing strategies in electronics and big-ticket items, particularly in Colombia, where currency depreciation affected margins.