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PriceSmart (PSMT) Reports a 4.4% Sales Uptick in August


PriceSmart, Inc. PSMT reports a 4.4% sales uptick in August 2018, following a rise of 2.6% and 5.9% in July and June, respectively. The company’s net sales came in at $248.8 million in the month under review compared with $238.3 million a year ago. Meanwhile, the metric jumped 4.9% year over year to $3,053.8 million for the 12 months (ended Aug 31, 2018). As of Aug 31, 2018, PriceSmart had 41 warehouse clubs in operation.

Further, comparable merchandise sales for the 39 warehouse clubs remained flat for the five weeks (ended Sep 2, 2018). Also, comparable warehouse sales rose 2.3% for the 52-week period (ended Sep 2, 2018) compared with the 52-week period a year ago.

PriceSmart’s strategy to sell limited products at lower prices has helped it to generate member loyalty and higher sales. Notably, the company offers a limited number of stock keeping units with large pack sizes. Analysts believe that the company’s continuous effort to check operating costs relative to net warehouse club sales enables it to offer better price. PriceSmart focuses on increasing the number of private label products as well.

Meanwhile, the retail landscape has been undergoing a fundamental change with technology playing a major role and the focus shifting to online shopping. Retailers are fast adopting the omni-channel mantra to provide a seamless shopping experience, whether online or in-stores. In this regard, PriceSmart acquired Aeropost — one of the largest cross-border logistics and e-commerce providers in Latin America and the Caribbean.

However, the company’s bottom line has been declining for quite some time now despite an increase in the top line. We note that higher cost of goods sold, increased SG&A expenses and rise in other expenses might have acted as deterrents. The acquisition of Aeropost adversely impacted bottom line by 8 cents a share in the third quarter of fiscal 2018.

Also, PriceSmart posted a negative earnings surprise of 11.6% in the third quarter of fiscal 2018. This was the fourth time in the trailing five quarters that the company has missed expectations.

In the past three months, this Zacks Rank #3 (Hold) stock has gained 0.1%, underperforming the industry’s growth of 14.3%.

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The TJX Companies TJX has a long-term earnings growth rate of 10.6% and a Zacks Rank #2.

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