GuruFocus - Release Date: January 10, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Net merchandise sales for the first quarter increased by 7.8% or 8.2% in constant currency, indicating strong sales growth.
- 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%.
- The private label brand, Member Selection, represented 27.7% of total merchandise sales, showing a 50 basis point increase from the previous year.
- Digital channel sales increased by 21.1% compared to the same period last year, reaching a record high of $69.4 million.
- Investments in technology and distribution infrastructure are expected to enhance operational efficiency and sales growth in the future.
- Total (EPA:TTEF) gross margin for the first quarter decreased by 20 basis points to 15.9% compared to the previous year.
- Net income for the first quarter was slightly lower at $37.4 million compared to $38 million in the same period last year.
- Currency conversion costs increased, impacting financial results, with a $3.4 million expense noted in the quarter.
- 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.
- Challenges in converting local currency to US dollars in certain markets, such as Trinidad and Honduras, limit financial flexibility.
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 (NASDAQ:PSMT) 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.
Q: What are the expected outcomes of the technology investments by the end of fiscal year 2025?
A: Robert Price, Interim CEO, noted that while some efficiencies might not be realized immediately, investments in back-office technology, point-of-sale systems, and online business are crucial for future growth. The focus is on improving operational efficiency and enhancing the member experience.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.