PRICESMART INC.
CEO: Jose Luis Laparte.
Revenue: $1.4 billion in FY 2010; $1.2 billion in FY 2009.
Net income: $49.3 million in FY 2010; $42.3 million in FY 2009.
No. of local employees: 110.
Headquarters: Sorrento Mesa.
Year founded: 1993.
Stock symbol and exchange: PSMT on Nasdaq.
Company description: Operator of 28 warehouse club retail stores in 11 countries and one U.S. territory in Central America and the Caribbean.
Consumer confidence in this country is finally picking up, but in markets served by PriceSmart Inc., it’s been gaining momentum for much of the past year.
Now at 28 club stores in 11 countries and one U.S. territory, the business that was spun off from the original Price Club warehouse retail chain started by Sol Price reported another nice quarter this month with a 22 percent gain in sales from the like quarter of the prior fiscal year to $377 million. Net income grew 42 percent to $14.8 million.
In November, the company reported its full fiscal year net warehouse sales grew 11.6 percent to $1.4 billion, while net income rose 16 percent to $49.3 million.
They’re the kind of numbers that impress stock investors, who were rewarded when the company’s stock price more than doubled in the past year. As of Jan. 14, shares, traded under PSMT on Nasdaq, broke through to a record high of $40.25, compared with $19.68 one year ago.
While U.S. retail sales plummeted in the throes of the Great Recession, things weren’t as dire in Central America and Caribbean nations, said PriceSmart Chief Executive Officer Jose Luis Laparte.
“We have to recognize that there’s a good momentum in the economies that we’re doing business,” said Laparte. “Consumer confidence is up and people are willing to spend more of their money.”
Central American Success
Stores in countries such as Panama, Guatemala and Costa Rica are faring better than those in Caribbean nations such as Trinidad, Barbados and Aruba, which are far more dependent on tourism, said PriceSmart Principal Financial Officer John Heffner.
The resiliency of some of these nations’ economies surprised most analysts tracking PriceSmart’s performance.
“The old saw that when America catches a cold, everyone else catches pneumonia, clearly didn’t happen,” said Jonathan Braatz, a partner at Kansas City Capital Associates in Kansas City, Mo. “The sales in those countries turned weaker (starting in 2008), but not to the extent that retailers in this country saw.”
The key reason why PriceSmart’s top line is increasing is its expansion. It added a fourth store in Trinidad in April and a third store in the Dominican Republic in November.
Coming to Colombia
The biggest news is the company’s moving into an entirely new market in Colombia. PriceSmart purchased land in the coastal city of Barranquilla last year, spending $6.5 million, and began construction of a store last month that should open in the summer, Heffner said.
At about 1 million in population, not only is the city much larger than any of PriceSmart’s existing markets, the country has six other cities with more than 1 million people. As for security problems associated with drug cartels, Laparte said things have been changing for the better, and Colombia is attracting plenty of new investment from this country and Europe, proof of a stable, expanding economy.
Entering into Colombia was the consequence of the much smaller nations’ demographics unable to support too many more warehouse club stores. Like their warehouse store cousins in this country, PriceSmart clubs charge an annual fee averaging $30 to shop, and membership has been rising consistently.
As of the end of November, it was 741,000, up nearly 13 percent from the like quarter of the prior year.
Figures Rising
The company’s membership rolls have continued to rise, and show that the concept is attracting more people from a lower income bracket who previously wouldn’t have considered such an investment, Braatz said of PriceSmart, which ranks seventh on the San Diego Business Journal’s list of Largest Public Companies with fiscal 2009 revenue of about $1.2 billion.
As for the stock price run-up, Braatz didn’t think it would rise by the same rate as it did last year. His firm removed the “market outperform” status a few weeks ago, and changed it to perform or hold.
PriceSmart’s top managers assert that they don’t run the business, which has about 4,700 employees overall, with the stock price in mind.
“We don’t spend any time working on the stock. We spend all our time working on the company,” said Heffner.
