PRICESMART ANNOUNCES FISCAL 2023 THIRD QUARTER OPERATING RESULTS AND $75 MILLION STOCK BUYBACK PROGRAM
NET MERCHANDISE SALES GREW 7.1%
COMPARABLE NET MERCHANDISE SALES INCREASED 5.8%
$0.94 EARNINGS PER DILUTED SHARE
$1.02 ADJUSTED EARNINGS PER DILUTED SHARE
SAN DIEGO, July 10, 2023 /PRNewswire/ -- PriceSmart, Inc. (NASDAQ: PSMT), operator of 51 warehouse clubs in 12 countries and one U.S. territory, today announced results for the fiscal third quarter of 2023, which ended on May 31, 2023, and announced a $75 million stock repurchase program.
Third Quarter Financial Results
Total revenues for the third quarter of fiscal year 2023 increased 6.4% to $1.10 billion compared to $1.03 billion in the comparable period of the prior year. For the third quarter of fiscal year 2023, net merchandise sales increased 7.1% to $1.07 billion from $999.0 million in the third quarter of fiscal year 2022. Net merchandise sales - constant currency increased 5.6% over the comparable prior year period. Foreign currency exchange rate fluctuations impacted net merchandise sales positively by $14.9 million, or 1.5%, versus the same period in the prior year.
The Company had 51 warehouse clubs in operation as of May 31, 2023 compared to 50 warehouse clubs in operation as of May 31, 2022.
Comparable net merchandise sales for the 49 warehouse clubs that have been open for greater than 13 ½ calendar months increased 5.8% for the 13-week period ended June 4, 2023 compared to the comparable 13-week period of the prior year. Comparable net merchandise sales - constant currency for the 13 weeks ended June 4, 2023 increased 4.3%. Foreign currency exchange rate fluctuations impacted comparable net merchandise sales positively by 1.5% versus the same period in the prior year.
The Company recorded operating income during the fiscal third quarter of $43.1 million compared to operating income of $33.8 million in the prior year period. Net income attributable to PriceSmart increased 53.6% to $29.6 million, or $0.94 per diluted share, in the third quarter of fiscal year 2023 compared to $19.3 million, or $0.62 per diluted share, in the third quarter of fiscal year 2022.
Adjusted net income attributable to PriceSmart for the third quarter of fiscal year 2023 was $31.9 million, or an adjusted $1.02 per diluted share, compared to adjusted net income of $19.3 million, or an adjusted $0.62 per diluted share, in the comparable prior year period.
Adjusted EBITDA for the third quarter of fiscal year 2023 was $63.2 million compared to $51.3 million in the same period last year.
Year-to-Date Financial Results
Total revenues for the nine months ended May 31, 2023 increased 8.2% to $3.29 billion compared to $3.04 billion in the comparable period of the prior year. For the first nine months of fiscal year 2023, net merchandise sales increased 8.7% to $3.21 billion from $2.95 billion in the comparable prior year period. Net merchandise sales - constant currency increased 9.0% over the comparable prior year period. Foreign currency exchange rate fluctuations impacted net merchandise sales negatively by $8.6 million, or 0.3%, versus the same period in the prior year.
Comparable net merchandise sales for the 49 warehouse clubs that have been open for greater than 13 ½ calendar months increased 6.5% for the 39-week period ended June 4, 2023 compared to the comparable 39-week period of the prior year. Comparable net merchandise sales - constant currency for the 39 weeks ended June 4, 2023 increased 6.7%. Foreign currency exchange rate fluctuations impacted comparable net merchandise sales negatively by 0.2% versus the same period in the prior year.
The Company recorded operating income during the first nine months of fiscal year 2023 of $152.4 million compared to operating income of $128.1 million in the prior year period. Net income attributable to PriceSmart increased 15.5% to $93.8 million, or $3.01 per diluted share, in the first nine months of fiscal year 2023 compared to $81.2 million, or $2.63 per diluted share, in the first nine months of fiscal year 2022.
Adjusted net income attributable to PriceSmart for the first nine months of fiscal year 2023 was $103.3 million, or an adjusted $3.32 per diluted share, compared to adjusted net income of $79.8 million, or an adjusted $2.58 per diluted share, in the comparable prior year period.
Adjusted EBITDA for the first nine months of fiscal year 2023 was $215.6 million compared to $178.3 million in the same period last year.
Stock Repurchases
The Board of Directors of PriceSmart, Inc. has authorized the Company to repurchase up to $75 million of common stock. The timing and total amount of stock repurchases will depend upon business, economic and market conditions, prevailing stock prices, and other considerations. The repurchase program has no time limit, may be suspended for periods or discontinued at any time and does not obligate the Company to acquire any amount of common stock. The repurchases are expected to be executed from time to time through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans.
Note Regarding Non-GAAP (Generally Accepted Accounting Principles) Financial Measures
The foregoing discussion of the Company's operating results includes references to adjusted net income, adjusted net income per diluted share, adjusted EBITDA and net merchandise sales - constant currency, which are non-GAAP financial measures. We believe these supplemental measures are useful to investors and analysts because they exclude items that we do not believe are indicative of our core operating performance. These non-GAAP financial measures are defined and reconciled to the most comparable GAAP measures later in this document.
Conference Call Information
PriceSmart management will host a conference call at 12:00 p.m. Eastern time (9:00 a.m. Pacific time) on Tuesday, July 11, 2023, to discuss the financial results. Individuals interested in participating in the conference call may do so by dialing toll free (888) 886-7786 or (416) 764-8658 for international callers and asking to join the PriceSmart earnings call. A digital replay will be available shortly following the conclusion of the call through July 18, 2023 by dialing (877) 674-7070 for domestic callers, or (416) 764-8692 for international callers, and entering replay passcode 780477#.
About PriceSmart
PriceSmart, headquartered in San Diego, owns and operates U.S.-style membership shopping warehouse clubs in Latin America and the Caribbean, selling high quality merchandise and services at low prices to PriceSmart Members. PriceSmart operates 51 warehouse clubs in 12 countries and one U.S. territory (nine in Colombia; eight in Costa Rica; seven in Panama; five in the Dominican Republic and Guatemala, four in Trinidad; three in Honduras and El Salvador, two in Nicaragua and Jamaica; and one each in Aruba, Barbados and the United States Virgin Islands). In addition, the Company plans to open a warehouse club in Medellín, Colombia in August 2023, a club in Escuintla, Guatemala in the fall of 2023 and a warehouse club in Santa Ana, El Salvador in early 2024. Once these three new clubs are open, the Company will operate 54 warehouse clubs.
This press release may contain forward-looking statements concerning PriceSmart, Inc.'s ("PriceSmart", the "Company" or "we") anticipated future revenues and earnings, adequacy of future cash flows, omni-channel initiatives, proposed warehouse club openings, the Company's performance relative to competitors and related matters. These forward-looking statements include, but are not limited to, statements containing the words "expect," "believe," "will," "may," "should," "project," "estimate," "anticipated," "scheduled," "intend," and like expressions, and the negative thereof. These statements are subject to risks and uncertainties that could cause actual results to differ materially including, but not limited to: various political, economic and compliance risks associated with our international operations, adverse changes in economic conditions in our markets, natural disasters, volatility in currency exchange rates and illiquidity of certain local currencies in our markets, competition, consumer and small business spending patterns, political instability, increased costs associated with the integration of online commerce with our traditional business, whether the Company can successfully execute strategic initiatives, our reliance on third party service providers, including those who support transaction and payment processing, data security and other technology services, cybersecurity breaches that could cause disruptions in our systems or jeopardize the security of Member or business information, cost increases from product and service providers, interruption of supply chains, novel coronavirus (COVID-19) related factors and challenges, exposure to product liability claims and product recalls, recoverability of moneys owed to PriceSmart from governments, risks associated with our leadership transition, and other important factors discussed in the Risk Factors section of the Company's most recent Annual Report on Form 10-K, and other factors discussed from time to time in other filings with the SEC, which are accessible on the SEC's website at www.sec.gov, including Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Forward-looking statements speak only as of the date that they are made, and the Company does not undertake to update them, except as required by law.
For further information, please contact Michael L. McCleary, EVP, Chief Financial Officer and Principal Accounting Officer (858) 404-8826 or send an email to [email protected].
PRICESMART, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA) | |||||||
Three Months Ended | Nine Months Ended | ||||||
May 31, | May 31, | May 31, | May 31, | ||||
Revenues: | |||||||
Net merchandise sales | $ 1,070,263 | $ 999,011 | $ 3,211,725 | $ 2,954,950 | |||
Export sales | 6,347 | 13,396 | 23,687 | 32,604 | |||
Membership income | 16,735 | 15,440 | 48,806 | 45,302 | |||
Other revenue and income | 3,309 | 2,963 | 9,431 | 11,867 | |||
Total revenues | 1,096,654 | 1,030,810 | 3,293,649 | 3,044,723 | |||
Operating expenses: | |||||||
Cost of goods sold: | |||||||
Net merchandise sales | 906,613 | 856,812 | 2,703,143 | 2,503,638 | |||
Export sales | 5,981 | 12,805 | 22,533 | 31,087 | |||
Non-merchandise | — | — | — | 1,809 | |||
Selling, general and administrative: | |||||||
Warehouse club and other operations | 106,172 | 96,081 | 306,694 | 281,270 | |||
General and administrative | 34,343 | 30,887 | 100,274 | 96,531 | |||
Separation costs associated with Chief Executive | — | — | 7,747 | — | |||
Pre-opening expenses | 495 | 306 | 584 | 1,406 | |||
Loss (gain) on disposal of assets | (2) | 157 | 295 | 881 | |||
Total operating expenses | 1,053,602 | 997,048 | 3,141,270 | 2,916,622 | |||
Operating income | 43,052 | 33,762 | 152,379 | 128,101 | |||
Other income (expense): | |||||||
Interest income | 3,161 | 473 | 6,260 | 1,540 | |||
Interest expense | (2,747) | (2,796) | (8,310) | (6,824) | |||
Other expense, net | (1,885) | (2,423) | (11,795) | (1,833) | |||
Total other expense | (1,471) | (4,746) | (13,845) | (7,117) | |||
Income before provision for income taxes and loss of | 41,581 | 29,016 | 138,534 | 120,984 | |||
Provision for income taxes | (12,019) | (9,776) | (44,647) | (39,729) | |||
Income (loss) of unconsolidated affiliates | 10 | 18 | (63) | (6) | |||
Net income | 29,572 | 19,258 | 93,824 | 81,249 | |||
Less: Net income attributable to noncontrolling interest | — | — | — | (19) | |||
Net income attributable to PriceSmart, Inc. | $ 29,572 | $ 19,258 | $ 93,824 | $ 81,230 | |||
Net income attributable to PriceSmart, Inc. per share | |||||||
Basic | $ 0.95 | $ 0.62 | $ 3.02 | $ 2.63 | |||
Diluted | $ 0.94 | $ 0.62 | $ 3.01 | $ 2.63 | |||
Shares used in per share computations: | |||||||
Basic | 30,800 | 30,615 | 30,752 | 30,582 | |||
Diluted | 30,829 | 30,629 | 30,770 | 30,588 | |||
PRICESMART, INC. CONSOLIDATED BALANCE SHEETS (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA) | |||
May 31, | August 31, | ||
ASSETS | |||
Current Assets: | |||
Cash and cash equivalents | $ 222,668 | $ 237,710 | |
Short-term restricted cash | 2,965 | 3,013 | |
Short-term investments | 112,629 | 11,160 | |
Receivables, net of allowance for doubtful accounts of $57 as of May 31, 2023 and $103 | 15,031 | 13,391 | |
Merchandise inventories | 442,580 | 464,411 | |
Prepaid expenses and other current assets (includes $0 and $2,761 as of May 31, 2023 | 51,317 | 43,894 | |
Total current assets | 847,190 | 773,579 | |
Long-term restricted cash | 10,739 | 10,650 | |
Property and equipment, net | 816,973 | 757,241 | |
Operating lease right-of-use assets, net | 106,411 | 111,810 | |
Goodwill | 43,152 | 43,303 | |
Deferred tax assets | 28,278 | 28,355 | |
Other non-current assets (includes $10,759 and $11,884 as of May 31, 2023 and | 70,132 | 72,928 | |
Investment in unconsolidated affiliates | 10,471 | 10,534 | |
Total Assets | $ 1,933,346 | $ 1,808,400 | |
LIABILITIES AND EQUITY | |||
Current Liabilities: | |||
Short-term borrowings | $ 10,414 | $ 10,608 | |
Accounts payable | 417,210 | 408,407 | |
Accrued salaries and benefits | 44,551 | 44,097 | |
Deferred income | 32,507 | 29,228 | |
Income taxes payable | 7,365 | 7,243 | |
Other accrued expenses and other current liabilities (includes $1,240 and $82 as of | 34,106 | 38,667 | |
Operating lease liabilities, current portion | 6,929 | 7,491 | |
Dividends payable | 14,426 | — | |
Long-term debt, current portion | 19,757 | 33,715 | |
Total current liabilities | 587,265 | 579,456 | |
Deferred tax liability | 1,967 | 2,165 | |
Long-term income taxes payable, net of current portion | 4,833 | 5,215 | |
Long-term operating lease liabilities | 114,377 | 118,496 | |
Long-term debt, net of current portion | 124,631 | 103,556 | |
Other long-term liabilities (includes $1,164 and $0 for the fair value of derivative | 10,580 | 8,439 | |
Total Liabilities | 843,653 | 817,327 | |
Stockholders' Equity: | |||
Common stock $0.0001 par value, 45,000,000 shares authorized; 31,934,824 and | 3 | 3 | |
Additional paid-in capital | 494,382 | 481,406 | |
Accumulated other comprehensive loss | (169,603) | (195,586) | |
Retained earnings | 802,002 | 736,894 | |
Less: treasury stock at cost, 870,670 shares as of May 31, 2023 and 792,764 shares as of | (37,091) | (31,644) | |
Total Stockholders' Equity | 1,089,693 | 991,073 | |
Total Liabilities and Equity | $ 1,933,346 | $ 1,808,400 | |
Reconciliation of Non-GAAP Financial Measures
The following tables calculate the Company's adjusted net income, adjusted net income per diluted share, adjusted EBITDA and net merchandise sales - constant currency, all of which are considered non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. These measures are customary for our industry and commonly used by competitors. These non-GAAP financial measures should not be reviewed in isolation or considered as an alternative to any other performance measure derived in accordance with GAAP and may not be comparable to similarly titled measures used by other companies in our industry or across different industries.
The adjusted net income and adjusted net income per diluted share metrics are important measures used by management to compare the performance of core operating results between periods. We define adjusted net income as net income, as reported, adjusted for: separation costs associated with the departure of our former Chief Executive Officer, gain on the sale of our Aeropost subsidiary, the write-off of certain VAT receivables following unfavorable court rulings, and the tax impact of the foregoing adjustments on net income. We define adjusted net income per diluted share as adjusted net income divided by the weighted-average diluted shares outstanding.
We believe adjusted net income and adjusted net income per diluted share are useful metrics to investors and analysts because they present more accurate year-over-year comparisons for our net income and net income per diluted share by excluding items are not the result of our normal operations.
The following table shows the Company's reconciliation of net income to adjusted net income and adjusted net income per diluted share for the periods indicated:
Three Months Ended | Nine Months Ended | ||||||
May 31, | May 31, | May 31, | May 31, | ||||
Net income attributable to PriceSmart as reported | $ 29,572 | $ 19,258 | $ 93,824 | $ 81,230 | |||
Adjustments: | |||||||
Separation costs associated with Chief Executive | — | — | 7,747 | — | |||
Gain on sale of Aeropost subsidiary (2) | — | — | — | (2,736) | |||
VAT receivable write-off (3) | 2,309 | — | 2,309 | — | |||
Tax impact of adjustments to net income (4) | — | — | (550) | 1,280 | |||
Adjusted net income attributable to PriceSmart | $ 31,881 | $ 19,258 | $ 103,330 | $ 79,774 | |||
Net income attributable to PriceSmart per diluted | $ 0.94 | $ 0.62 | $ 3.01 | $ 2.63 | |||
Separation costs associated with Chief Executive | — | — | 0.23 | — | |||
Gain on sale of Aeropost subsidiary | — | — | — | (0.05) | |||
VAT receivable write-off | 0.08 | — | 0.08 | — | |||
Adjusted net income attributable to PriceSmart per | $ 1.02 | $ 0.62 | $ 3.32 | $ 2.58 | |||
(1) | Reflects $7.7 million of separation costs associated with the departure of our former Chief Executive Officer in February 2023. |
(2) | Reflects a gain of $2.7 million associated with the sale of our Aeropost subsidiary on October 1, 2021. |
(3) | Reflects $2.3 million of VAT receivables deemed not recoverable and written-off in the third quarter of fiscal year 2023 following unfavorable court rulings. |
(4) | Reflects the tax effect of the above-mentioned adjustments. |
Adjusted EBITDA
Adjusted EBITDA is defined as net income before interest expense, net, provision for income taxes and depreciation and amortization, adjusted for the impact of certain other items, including interest income; other income (expense), net; separation costs associated with Chief Executive Officer departure; and VAT receivable write-off. The following is a reconciliation of our Net income to Adjusted EBITDA for the periods presented:
Three Months Ended | Nine Months Ended | ||||||
May 31, | May 31, | May 31, | May 31, | ||||
Net income attributable to PriceSmart as reported | $ 29,572 | $ 19,258 | $ 93,824 | $ 81,230 | |||
Adjustments: | |||||||
Interest expense | 2,747 | 2,796 | 8,310 | 6,824 | |||
Provision for income taxes | 12,019 | 9,776 | 44,647 | 39,729 | |||
Depreciation and amortization | 17,821 | 17,557 | 53,264 | 50,258 | |||
Interest income | (3,161) | (473) | (6,260) | (1,540) | |||
Other expense, net (1) | 1,885 | 2,423 | 11,795 | 1,833 | |||
Separation costs associated with Chief Executive | — | — | 7,747 | — | |||
VAT receivable write-off (3) | 2,309 | — | 2,309 | — | |||
Adjusted EBITDA | $ 63,192 | $ 51,337 | $ 215,636 | $ 178,334 | |||
(1) | Primarily consists of foreign currency losses or gains due to the revaluation of monetary assets and liabilities (primarily U.S. dollars). This line item includes a gain of $2.7 million associated with the sale of our Aeropost subsidiary on October 1, 2021. |
(2) | Reflects $7.7 million of separation costs associated with the departure of our former Chief Executive Officer in February 2023. On a go-forward basis, our Interim Chief Executive Officer has declined to receive compensation for his services during his term; therefore, we expect selling, general and administrative expenses will be positively impacted by approximately $2.5 million of savings each quarter during his term, reduced by compensation increases for other executives related to the change in leadership. |
(3) | Reflects $2.3 million of VAT receivables deemed not recoverable and written-off in the third quarter of fiscal year 2023 following unfavorable court rulings. |
Net Merchandise Sales - Constant Currency
As a multinational enterprise, we are exposed to changes in foreign currency exchange rates. The translation of the operations of our foreign-based entities from their local currencies into U.S. dollars is sensitive to changes in foreign currency exchange rates and can have a significant impact on our reported financial results. We believe that constant currency is a useful measure, indicating the actual growth of our operations. When we use the term "net merchandise sales - constant currency", it means that we have translated current year net merchandise sales at prior year monthly average exchanges rates. Net merchandise sales - constant currency results exclude the effects of foreign currency translation. Impact of foreign currency is the effect of currency fluctuations on our net merchandise sales.
Net merchandise sales growth rate on a net merchandise sales - constant currency basis is calculated as follows:
May 31, 2023 | |||||||
Three Months Ended | Nine Months Ended | ||||||
Net | % Growth | Net | % Growth | ||||
Net merchandise sales | $ 1,070,263 | 7.1 % | $ 3,211,725 | 8.7 % | |||
Favorable (unfavorable) impact of foreign | 14,939 | 1.5 % | (8,580) | (0.3) % | |||
Net merchandise sales on a constant-currency | $ 1,055,324 | 5.6 % | $ 3,220,305 | 9.0 % | |||
SOURCE PriceSmart, Inc.
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