8-K
PRICESMART INC (PSMT)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 31, 2022
PriceSmart, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 000-22793 | 33-0628530 |
|---|---|---|
| (State or Other Jurisdiction of<br><br>Incorporation) | (Commission File Number) | (I.R.S. Employer<br><br>Identification No.) |
| 9740 Scranton Road | ||
| --- | ||
| San Diego, CA 92121 | ||
| (Address of principal executive offices and zip code) |
Registrant's telephone number, including area code: (858) 404-8800
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2)(b)) |
| | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
| Title of each class | Trading Symbol | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $0.0001 par value | PSMT | NASDAQ Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On October 31, 2022, PriceSmart, Inc. issued a press release regarding the results of operations for its fourth quarter ended August 31, 2022. A copy of the press release is furnished herewith as Exhibit 99.1. Pursuant to the rules and regulations of the Securities and Exchange Commission, such exhibit and the information set forth therein and herein shall be deemed “furnished” and not “filed” for purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section.
Item 9.01. Exhibits.
| (d) | The following exhibit is furnished herewith: | |
|---|---|---|
| Exhibit<br>No. | Description | |
| 99.1 | Press Release of PriceSmart, Inc. dated October 31, 2022. | |
| 104 | The cover page from this Current report on Form 8-K, formatted in Inline XBRL. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: October 31, 2022 | /s/ MICHAEL L. MCCLEARY |
|---|---|
| Michael L. McCleary | |
| Executive Vice President and Chief Financial Officer | |
| (Principal Financial Officer and | |
| Principal Accounting Officer) |
EXHIBIT INDEX
| Exhibit<br>Number | Description |
|---|---|
| 99.1 | Press Release of PriceSmart, Inc. dated October 31, 2022. |
| 104 | The cover page from this Current report on Form 8-K, formatted in Inline XBRL. |
Exhibit 991\_4QFY22\_Earnings Press Release
PRICESMART ANNOUNCES FISCAL 2022 FOURTH QUARTER OPERATING RESULTS
NET MERCHANDISE SALES GREW 13.6%
COMPARABLE NET MERCHANDISE SALES INCREASED 9.2%
MEMBERSHIP BASE AT RECORD HIGH AND RENEWAL RATE OF 88.9%
EPS GREW 19% TO $0.75
San Diego, CA (October 31, 2022) - PriceSmart, Inc. (NASDAQ: PSMT), operator of 50 warehouse clubs in 12 countries and one U.S. territory, today announced results for the fiscal fourth quarter of 2022, which ended on August 31, 2022.
Comments from Sherry S. Bahrambeygui, Chief Executive Officer:
“Our team delivered impressive results for the fourth quarter, with net merchandise sales finishing at $989.9 million and total revenues exceeding $1.0 billion for the quarter and $4.0 billion for the year. Net merchandise sales grew by 13.6%, after a negative 2.9% currency impact, and comparable net merchandise sales increased by 9.2%, after a negative 2.7% currency impact.
“Our total membership base grew to a new record of 1.76 million accounts, representing growth of 5.5% versus last year. Our 12-month membership renewal rate was 88.9%, and our membership income for the fourth quarter was a record $15.6 million, an increase of 6.7% over the same period last year. We believe that these strong results and solid renewal rates demonstrate that our team is executing well on our unique club-focused business model and that our Members are pleased with the value they are receiving.
“Our team adeptly handled the excess inventory challenges head-on and efficiently moved through overstocks, allowing us to begin restoring a more normalized inventory balance and margin structure.
“We ended the year with a strong balance sheet, which included cash, cash equivalents and restricted cash of $251.4 million and debt of only $137.3 million.
“As to fiscal year 2023, we are off to a respectable start with September total net merchandise sales of $324.1 million, an increase of 12.1% over the same period in the prior year, and comparable net merchandise sales for the four-week period ended October 2, 2022 that increased 7.8% compared to the same period last year. Currency fluctuations continued to negatively impact net merchandise and comparable net merchandise sales by 2.0% and 2.1%, respectively, in the first month of the fiscal first quarter.
"Our team continually strives for improvement, and with each new experience, our team becomes more agile and better prepared to take on the uncertainties and capitalize on potential opportunities going forward."
Fourth Quarter Financial Results
Total revenues for the fourth quarter of fiscal year 2022 increased 12.3% to $1.02 billion compared to $909.6 million in the comparable period of the prior year. For the fourth quarter of fiscal year 2022, net merchandise sales increased 13.6% to $989.9 million from $871.2 million in the fourth quarter of fiscal year 2021. Foreign currency exchange rate fluctuations impacted net merchandise sales negatively by $24.8 million, or 2.9%, versus the same period in the prior year.
The Company had 50 warehouse clubs in operation as of August 31, 2022 compared to 47 warehouse clubs in operation as of August 31, 2021.
Comparable net merchandise sales for the 47 warehouse clubs that have been open for greater than 13 ½ calendar months increased 9.2% for the 14-week period ended September 4, 2022 compared to the comparable 14-week period of the prior
year. Foreign currency exchange rate fluctuations impacted comparable net merchandise sales negatively by $24.9 million, or 2.7%, versus the same period in the prior year.
The Company recorded operating income during the fiscal fourth quarter of $39.0 million compared to operating income of $32.5 million in the prior year period. Net income attributable to PriceSmart grew 19.5% to $23.3 million, or $0.75 per diluted share, in the fourth quarter of fiscal year 2022 as compared to $19.5 million, or $0.63 per diluted share, in the fourth quarter of fiscal year 2021.
Full Year Financial Results
Total revenues for the fiscal year ended August 31, 2022 increased 12.3% to $4.07 billion compared to $3.62 billion in the prior year.
Comparable net merchandise sales for warehouse clubs that have been open for greater than 13 ½ calendar months increased 10.4% for the 53-week period ended September 4, 2022 compared to the comparable 53-week period of the prior year. Foreign currency exchange rate fluctuations impacted comparable net merchandise sales negatively by $76.2 million, or 2.2%, versus the prior year.
The Company recorded operating income during the fiscal year ended August 31, 2022 of $167.1 million compared to operating income of $158.0 million in the prior year. Net income attributable to PriceSmart grew 6.6% to $104.5 million, or $3.38 per diluted share, in the fiscal year ended August 31, 2022 as compared to $98.0 million, or $3.18 per diluted share, in the prior year.
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, November 1, 2022, to discuss the financial results. Individuals interested in participating in the conference call may do so by dialing toll free (855) 209-8211 or (412) 317-5214 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 November 8, 2022 by dialing (877) 344-7529 for domestic callers, or (412) 317-0088 for international callers, and entering replay passcode 1071897.
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 50 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; two each in El Salvador, 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 San Miguel, El Salvador in the spring of 2023 and a warehouse club in Medellín, Colombia in the summer of 2023. Once these two new clubs are open, the Company will operate 52 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, 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 ir@pricesmart.com.
PRICESMART, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
| | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended | | | | Twelve Months Ended | | | | | | August 31, | | August 31, | | August 31, | | August 31, | | | | 2022 | | 2021 | | 2022 | | 2021 | | | Revenues: | | | | | | | | | | Net merchandise sales | $ | 989,867 | $ | 871,191 | $ | 3,944,817 | $ | 3,465,442 | | Export sales | | 12,613 | | 10,720 | | 45,217 | | 41,520 | | Membership income | | 15,585 | | 14,603 | | 60,887 | | 56,030 | | Other revenue and income | | 3,305 | | 13,092 | | 15,172 | | 56,879 | | Total revenues | | 1,021,370 | | 909,606 | | 4,066,093 | | 3,619,871 | | Operating expenses: | | | | | | | | | | Cost of goods sold: | | | | | | | | | | Net merchandise sales | | 836,424 | | 733,036 | | 3,340,062 | | 2,912,489 | | Export sales | | 11,987 | | 9,945 | | 43,074 | | 39,513 | | Non-merchandise | | — | | 5,489 | | 1,809 | | 23,336 | | Selling, general and administrative: | | | | | | | | | | Warehouse club and other operations | | 96,891 | | 94,618 | | 378,161 | | 359,221 | | General and administrative | | 36,654 | | 33,400 | | 133,185 | | 125,416 | | Pre-opening expenses | | 65 | | 198 | | 1,471 | | 849 | | Loss on disposal of assets | | 384 | | 459 | | 1,265 | | 1,027 | | Total operating expenses | | 982,405 | | 877,145 | | 3,899,027 | | 3,461,851 | | Operating income | | 38,965 | | 32,461 | | 167,066 | | 158,020 | | Other expense: | | | | | | | | | | Interest income | | 661 | | 525 | | 2,201 | | 1,979 | | Interest expense | | (2,787) | | (1,353) | | (9,611) | | (7,210) | | Other expense, net | | (1,402) | | (1,471) | | (3,235) | | (5,603) | | Total other expense | | (3,528) | | (2,299) | | (10,645) | | (10,834) | | Income before provision for income taxes and <br>loss of unconsolidated affiliates | | 35,437 | | 30,162 | | 156,421 | | 147,186 | | Provision for income taxes | | (12,129) | | (10,704) | | (51,858) | | (48,969) | | Loss of unconsolidated affiliates | | (4) | | (24) | | (10) | | (58) | | Net income | | 23,304 | | 19,434 | | 104,553 | | 98,159 | | Less: net income attributable to noncontrolling interest | | — | | 27 | | (19) | | (196) | | Net income attributable to PriceSmart, Inc. | $ | 23,304 | $ | 19,461 | $ | 104,534 | $ | 97,963 | | Net income attributable to PriceSmart, Inc. per share available for distribution: | | | | | | | | | | Basic | $ | 0.75 | $ | 0.63 | $ | 3.38 | $ | 3.18 | | Diluted | $ | 0.75 | $ | 0.63 | $ | 3.38 | $ | 3.18 | | Shares used in per share computations: | | | | | | | | | | Basic | | 30,620 | | 30,424 | | 30,591 | | 30,403 | | Diluted | | 30,638 | | 30,424 | | 30,600 | | 30,403 | | Dividends per share | $ | 0.43 | $ | 0.35 | $ | 0.86 | $ | 0.70 |
PRICESMART, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
| | |||
|---|---|---|---|
| | |||
| | |||
| | |||
| | |||
| | August 31, | ||
| | 2021 | ||
| ASSETS | |||
| Current Assets: | |||
| Cash and cash equivalents | 237,710 | $ | 202,060 |
| Short-term restricted cash | 3,013 | 3,647 | |
| Short-term investments | 11,160 | 50,233 | |
| Receivables, net of allowance for doubtful accounts of 103 as of August 31, 2022 and 94 as of August 31, 2021, respectively | 13,391 | 12,359 | |
| Merchandise inventories | 464,411 | 389,711 | |
| Prepaid expenses and other current assets (includes 2,761 and 0 as of August 31, 2022 and August 31, 2021, respectively, for the fair value of derivative instruments) | 43,894 | 39,194 | |
| Total current assets | 773,579 | 697,204 | |
| Long-term restricted cash | 10,650 | 9,772 | |
| Property and equipment, net | 757,241 | 730,204 | |
| Operating lease right-of-use assets, net | 111,810 | 123,655 | |
| Goodwill | 43,303 | 45,095 | |
| Other intangibles, net | 765 | 7,762 | |
| Deferred tax assets | 28,355 | 24,225 | |
| Other non-current assets (includes 11,884 and 2,464 as of August 31, 2022 and August 31, 2021, respectively, for the fair value of derivative instruments) | 72,163 | 57,329 | |
| Investment in unconsolidated affiliates | 10,534 | 10,544 | |
| Total Assets | 1,808,400 | $ | 1,705,790 |
| LIABILITIES AND EQUITY | |||
| Current Liabilities: | |||
| Short-term borrowings | 10,608 | $ | — |
| Accounts payable | 408,407 | 388,791 | |
| Accrued salaries and benefits | 44,097 | 41,896 | |
| Deferred income | 29,228 | 26,898 | |
| Income taxes payable | 7,243 | 8,310 | |
| Other accrued expenses and other current liabilities (includes 82 and 0 as of August 31, 2022 and August 31, 2021, respectively, for the fair value of derivative instruments) | 38,667 | 39,736 | |
| Operating lease liabilities, current portion | 7,491 | 8,526 | |
| Long-term debt, current portion | 33,715 | 19,395 | |
| Total current liabilities | 579,456 | 533,552 | |
| Deferred tax liability | 2,165 | 1,568 | |
| Long-term income taxes payable, net of current portion | 5,215 | 4,160 | |
| Long-term operating lease liabilities | 118,496 | 129,256 | |
| Long-term debt, net of current portion | 103,556 | 110,110 | |
| Other long-term liabilities (includes 0 and 3,010 for the fair value of derivative instruments and 8,440 and 7,380 for post-employment plans as of August 31, 2022 and August 31, 2021, respectively) | 8,439 | 10,930 | |
| Total Liabilities | 817,327 | 789,576 |
All values are in US Dollars.
PRICESMART, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
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| Stockholders' Equity: | |||
| Common stock 0.0001 par value, 45,000,000 shares authorized; 31,697,590 and 31,467,971 shares issued and 30,904,826 and 30,755,308 shares outstanding (net of treasury shares) as of August 31, 2022 and August 31, 2021, respectively | 3 | 3 | |
| Additional paid-in capital | 481,406 | 465,015 | |
| Accumulated other comprehensive loss | (195,586) | (182,508) | |
| Retained earnings | 736,894 | 658,919 | |
| Less: treasury stock at cost, 792,764 shares as of August 31, 2022 and 712,663 shares as of August 31, 2021 | (31,644) | (26,084) | |
| Total stockholders' equity attributable to PriceSmart, Inc. stockholders | 991,073 | 915,345 | |
| Noncontrolling interest in consolidated subsidiaries | — | 869 | |
| Total Stockholders' Equity | 991,073 | 916,214 | |
| Total Liabilities and Equity | 1,808,400 | $ | 1,705,790 |
All values are in US Dollars.