PRICESMART, INC. Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements concerningPriceSmart, 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 only as of the date they are made, and we do not undertake to update these statements, except as required by law. These statements are subject to risks and uncertainties that could cause actual results to differ materially including, but not limited to the risks detailed in this Quarterly Report under the heading "Part II. Item 1A. Risk Factors" and in the Annual Report on Form 10-K under the heading "Part I. Item 1A. Risk Factors" and "Part I Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year endedAugust 31, 2022 filed with theUnited States Securities and Exchange Commission ("SEC") onOctober 31, 2022 . These risk factors may be updated from time to time in our other filings with theSEC , which are accessible on theSEC's website at www.sec.gov. 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. In addition, these risks are not the only risks that the Company faces. The Company could also be affected by additional factors that apply to all companies operating globally and in theU.S. , as well as other risks that are not presently known to the Company or that the Company currently considers to be immaterial.
Overview
The mission of our business is to improve the lives of our employees and Members, provide socially responsible support to the communities in which we operate our business and deliver a fair financial return to our investors.PriceSmart is the only membership-based warehouse club business in the markets where we operate inLatin America and theCaribbean . Following in the tradition of PriceClub® and Costco®, our goal is to offer high quality merchandise at the lowest possible prices by leveraging volume purchasing and eliminating inefficiencies from the distribution network.PriceSmart opened its first location inPanama City, Panama in October of 1996. Today, our company operates 50 warehouse clubs in 12 countries, plus theU.S. Virgin Islands , with revenues in excess of$4.0 billion in fiscal year 2022. Membership is a key characteristic of warehouse clubs. As ofNovember 30, 2022 ,PriceSmart had in excess of 1.7 million membership accounts, with the average Member paying approximately$35 per year in membership fees. These membership fees are applied to lowering the price of the products we sell. We believe membership also provides a sense of identity and loyalty that, in turn, reduces the need forPriceSmart to spend money on advertising. As is typical of all warehouse club businesses,PriceSmart stocks a limited number of stock keeping units (SKU's). Our SKU count is less than 3,000 items, compared to a grocery store that might stock 30,000 SKU's or a hypermarket that might stock over 100,000 SKU's. We believe limiting the number of SKU's contributes to efficiencies at all levels of our business, thereby supporting lower prices for our Members.PriceSmart offers an extensive selection of its own private label products under the brand "Member's Selection®". The Member's Selection® brand provides our Members with high quality private label merchandise at prices significantly less than the comparable national brands. Similar to other warehouse clubs,PriceSmart has food courts at all locations with the traditional selection of hot dogs and pizza, along with other items. Unique to many of ourPriceSmart clubs, are our coffee bars selling coffee and coffee specialties, with coffee sourced from the coffee growing regions in our markets.PriceSmart also offers an extensive line of bakery products, which are produced by our bakeries. Our warehouse clubs range in sales floor size from approximately 30,000 to 60,000 square feet. Our larger clubs are typically located in and around densely populated major cities that include a large penetration of consumers with significant disposable income. Our smaller clubs tend to be in areas with less population density, but where there are significant opportunities to serve the population and supply and support businesses. We also operate smaller format clubs in urban areas where it is difficult to secure sufficient real estate at a reasonable cost. 32
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Table of Contents
We strategically invest in technology to enhance Member experience and convenience. We believe technology allows us to access valuable data that supports our ability to increase efficiencies and gain important insights about our Members. We now provide digital membership and auto-renewal for the convenience of our Members.
Our logistics and distribution infrastructure is key to maximizing efficiencies. We continually review and upgrade our logistics and distribution systems in an attempt to capture efficiencies as our business grows in sales volume, in geography and through activity generated by e-commerce. We utilize regional distribution centers in theU.S. andCosta Rica as well as several local distribution centers to distribute merchandise efficiently and to create flexibility to mitigate the risk of supply-chain disruption. We also seek to capture efficiencies by using specialized distribution centers for produce and centralized production for categories such as bakery and meat processing. Purchasing land and constructing warehouse clubs is generally our largest ongoing capital investment. Securing land for warehouse club locations is challenging in several of our markets because suitable sites at economically feasible prices are difficult to find. We believe ownership of our real estate in many of our markets provides several advantages, including lower operating expenses, flexibility to expand or otherwise enhance our buildings, long-term control over the use of the property and potential increase of value in future years. Although we prefer to own real estate, we sometimes lease our real estate when leasing provides the best available opportunity. We do not currently face direct competition fromU.S. membership warehouse club operators. However, we do face competition from various local and international retail formats such as hypermarkets, supermarkets, cash and carry outlets, hard discounters, home improvement centers, electronic retailers, specialty stores, convenience stores, traditional wholesale distribution and online sales. The number of warehouse clubs for each country or territory were as follows: Number of Number of Anticipated Warehouse Clubs Warehouse Clubs Warehouse in Operation as of in Operation as of Club Openings Country/Territory November 30, 2021 November 30, 2022 In Fiscal Year 2023 Colombia 9 9 1 Costa Rica 8 8 - Panama 7 7 - Dominican Republic 5 5 - Guatemala 5 5 - Trinidad 4 4 - Honduras 3 3 - El Salvador 2 2 1 Nicaragua 2 2 - Jamaica 1 2 - Aruba 1 1 - Barbados 1 1 - U.S. Virgin Islands 1 1 - Totals 49 50 2 Our warehouse clubs, one regional distribution center and several smaller local distribution centers are located inLatin America and theCaribbean , and our corporate headquarters,U.S. buying operations and our larger regional distribution center are located primarily inthe United States . Our operating segments arethe United States ,Central America , theCaribbean andColombia . 33
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Table of Contents We are currently constructing a smaller format warehouse club in the Hacienda San Andrés area of San Miguel,El Salvador , approximately 100 miles east of the capital citySan Salvador , which is anticipated to open in the spring of 2023. It will be our third club inEl Salvador . In addition, we are proceeding with the construction of a smaller format warehouse club in the affluent El Poblado area of Medellín,Colombia . We expect to open this warehouse club, which will be our second club in Medellín and the Company's tenth warehouse club inColombia , in the summer of 2023. Once these two new clubs are open, we will operate 52 warehouse clubs.
We also export products to a retailer in
Factors Affecting Our Business
We continue to encounter operational challenges directly or indirectly related to the COVID-19 pandemic, including increased supply chain pressures, inflation, and foreign currency fluctuations relative to theU.S. dollar. The COVID-19 pandemic may continue to affect consumer purchasing behavior as it evolves, and we might not be able to meet unanticipated shifts in consumer demand. The pandemic could also give rise to additional operating costs that could have long-term impacts on our financial condition and results of operations. For additional information, refer to the risk factors discussed in "Part I. Item 1A. Risk Factors" in the Company's Annual Report on Form 10-K for the year endedAugust 31, 2022 . However, the COVID pandemic also has presented us opportunities to improve how we do business, how we serve our Members and how we treat our employees. In response to the pandemic, we: ?Increased our focus on expanding local sourcing and near-shoring of goods that we offer, ?Expedited our efforts to engage with Members online, including the launch of PriceSmart.com, and ?Highlighted the importance of employee well-being and accelerated our decision to ensure health coverage for all employees in our Company. We also are establishing flexible schedules and hybrid work environments for office employees in order to maximize efficiencies and provide opportunity for balance in our employees' lives.
Overall economic trends, foreign currency exchange volatility, and other factors impacting the business
Our sales and profits vary from market to market depending on general economic factors, including GDP growth; consumer preferences; foreign currency exchange rates; political policies and social conditions; local demographic characteristics (such as population growth); the number of years we have operated in a particular market; and the level of retail and wholesale competition in that market. The economies of many of our markets are dependent on foreign trade, tourism, and foreign direct investments. Uncertain economic conditions and slowdown in global economic growth and investment may impact the economies in our markets, causing significant declines in GDP and employment and devaluations of local currencies against theU.S. dollar. During the first quarter of fiscal year 2023, inflation in all of our markets and devaluations of foreign currency, especially inColombia , were significant headwinds. However, some markets, likeCosta Rica , benefited from currency appreciation. Substantial product cost increases due to inflation or commodity price increases could impact our financial results and could lead to reduced sales, fewer units sold, and/or margin pressure. Events directly or indirectly related to COVID-19 have resulted in market and supply-chain disruptions. These factors have increased the complexity of managing our inventory flow and business; however, during the first quarter of fiscal year 2023, when compared to the fourth quarter of fiscal year 2022, we saw a general improvement in transit days and reduction in freight rates of our shipping containers. We are working to hold down and/or mitigate the price increases passed on to our Members while maintaining the right inventory mix to grow sales. One key mitigating factor has been our expanded network of distribution centers, which has facilitated alternative routings of shipments, increased throughput, and provided flexibility to mitigate our supply-chain challenges and risks more effectively. Our Colombian market has experienced a foreign currency devaluation against theU.S. dollar of approximately 20% as ofNovember 30, 2022 compared toNovember 30, 2021 . This devaluation increases the cost of imported merchandise to the Member, negatively impacts sales volume and may result in margin pressure. Currency fluctuation can be one of the largest variables affecting our overall sales and profit performance, as we have experienced in prior fiscal years, because many of our markets are susceptible to foreign currency exchange rate volatility. During the first quarter of fiscal 2023, approximately 78.5% of our net merchandise sales were in currencies other than theU.S. dollar. Of those sales, 49.2% consisted of sales of products we purchased inU.S. dollars. 34 --------------------------------------------------------------------------------
Table of Contents A devaluation of local currency reduces the value of sales and membership income that is generated in that country when translated toU.S. dollars for our consolidated results. In addition, when local currency experiences devaluation, we may elect to increase the local currency price of imported merchandise to maintain our target margins, which could impact demand for the merchandise affected by the price increase. We may also modify the mix of imported versus local merchandise and/or the source of imported merchandise to mitigate the impact of currency fluctuations. OurColombia market has experienced a foreign currency devaluation against theU.S. dollar of approximately 20% as ofNovember 30, 2022 compared toNovember 30, 2021 . This can increase the cost of imported merchandise to the Member and negatively impact sales volume. As a result, we are considering actions, such as strategically holding pricing steady on certain keyU.S. imports toColombia , instead of increasing the prices to reflect the rising costs of these items. This would adversely impact our total gross margin percentage for ourColombia segment and our Company overall. Information about the effect of local currency devaluations is discussed further in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Net Merchandise Sales and Comparable Sales." Our wallet-share capture of total retail and wholesale sales can vary from market to market due to competition and the availability of other shopping options for our Members. Demographic characteristics within each of our markets can affect both the overall level of sales and future sales growth opportunities. Certain island markets, such asAruba ,Barbados and theU.S. Virgin Islands , offer us limited upside for sales growth given their overall market size. We continue to face the risk of political instability which may have significant effects on our business. For example, civil unrest inColombia in response to tax reform and austerity measures paralyzed significant portions of the country's infrastructure as roadblocks and riots disrupted normal economic activity during the third quarter of fiscal year 2021.Nicaragua andHonduras experienced anti-government protests in 2019;Costa Rica also had a general strike against tax reform measures that significantly impeded regular economic activity in 2018. Our operations are subject to volatile weather conditions and natural disasters. InNovember 2020 , Hurricanes Eta and Iota brought severe rainfall, winds, and flooding to a significant portion ofCentral America , especiallyHonduras , which caused significant damage to parts of that country's infrastructure. Although our warehouse clubs were not significantly affected and we were able to manage our supply chain to keep our warehouse clubs stocked with merchandise, similar natural disasters could adversely impact our overall sales, costs and profit performance in the future. Periodically, we experience a lack of availability ofU.S. dollars in certain markets (U.S. dollar illiquidity), particularly inTrinidad . This can and has impeded our ability to convert local currencies obtained through merchandise sales intoU.S. dollars to settle theU.S. dollar liabilities associated with our imported products and to otherwise redeploy these funds in our Company. This illiquidity also increases our foreign exchange exposure to any devaluation of the local currency relative to theU.S. dollar. For instance, during fiscal year 2021, we experienced significant limitations on our ability to convertTrinidad dollars toU.S. dollars or other tradeable currencies. Our balance as ofNovember 30, 2022 ofTrinidad dollar denominated cash and cash equivalents and short and long-term investments measured inU.S. dollars was$25.6 million , a decrease of$74.9 million from the peak of$100.5 million as ofNovember 30, 2020 . However, as theTrinidad central bank strictly manages the exchange rate of theTrinidad dollar with theU.S. dollar and affects the level of US Dollar liquidity in the market through its interventions, we are subject to continued challenges in converting ourTrinidad dollars toU.S. dollars, as well as being exposed to the risk of a potential devaluation of the currency.
Mission and Business Strategy
PriceSmart exists to improve the lives and businesses of our Members, our employees and our communities through the responsible delivery of the best quality goods and services at the lowest possible prices. Our mission is to serve as a model company, which operates profitably and provides a good return to our investors, by providing Members in emerging and developing markets with exciting, high quality merchandise sourced from around the world and valuable services at compelling prices in safeU.S. style clubs and through PriceSmart.com. We prioritize the well-being and safety of our Members and employees. We provide good jobs, fair wages and benefits and opportunities for advancement. We strive to treat our suppliers right and empower them when we can. We conduct ourselves in a socially responsible manner as we endeavor to improve the quality of the lives of our Members and their businesses, while respecting the environment and the laws of all the countries in which we operate. The annual membership fee enables us to operate our business with lower margins than traditional retail stores. As we continue to invest in technological capabilities, we are increasing our tools to drive sales and operational efficiencies. We believe we are well positioned to blend the excitement and appeal of our brick-and-mortar business with the convenience and additional benefits of online shopping and services, and meanwhile, enhance Member experience and engagement. 35 --------------------------------------------------------------------------------
Table of Contents Growth As we look to the future, our Company is focused on three major drivers of growth: ?Invest inRemodeling Current PriceSmart Clubs , Adding New PriceSmart Locations and Opening More Distribution Centers ?Increase Membership Value ?Drive Incremental Sales via PriceSmart.com and Enhanced Online, Digital and Technological Capabilities I.Invest inRemodeling Current PriceSmart Clubs , Adding New PriceSmart Locations and Opening More Distribution Centers. We believe that one of the quickest and most effective ways to increase sales and profitability is to increase the size and number of parking spaces in our high-volume locations. For instance, we are currently preparing to remodel and expand one of our clubs inSan Salvador, El Salvador . We continue to pursue warehouse club growth opportunities in our markets and to assess opportunities in new markets. For example, we plan to open a warehouse club inEl Salvador , located in the city of San Miguel in the spring of 2023 and to add a second warehouse club in the city ofMedellin, Colombia , in late summer 2023. Our distribution network currently consists of major distribution centers inMiami andCosta Rica , complemented by varying distribution activities in our other markets. Based on our experience with ourCosta Rica distribution center, we believe that investing in similar distribution centers in other major markets will play a strategic role in a variety of ways. Configuring these distribution centers to effectively operate as cross-docking facilities, helps us more efficiently manage the high volumes of locally sourced and imported merchandise for our club business. Distribution centers are also strategically important in providing the infrastructure to support PriceSmart.com online sales to both our business and our family Members. In addition to major distribution centers,PriceSmart has been investing in what we call Produce Distribution Centers, which enable us to purchase product directly from farms both in our markets, as well as for imported produce. II.Increase Membership Value. We are seeking to attract more Members and retain our current Members by expanding the benefits of being a Member ofPriceSmart through sales, services, and convenience. As benefits grow and the value of being a PriceSmart Member increases, adjustments to the membership fee may be warranted. A larger membership base and higher membership fee contribute to the bottom line of the business. We focus on growth of our membership base, Member renewal rates and spend per Member as part of determining how Members see our value. By adding more benefits that Members can only obtain with us, we expect to see growth in the number of Members, which drives Membership income and Merchandise sales. Recent examples of enhancements we have made to the value of membership include: additional services such as the ability for all of our Members to transact on PriceSmart.com; pickup and delivery service in all of our clubs; and the implementation and expansion of our Well-being initiative, which offers Optical services with free eye exams for the Member and additional members of their families and deeply discounted eyeglass frames; Audiology services with free hearing exams and deeply discounted hearing aids; and Pharmacy, which provides a significant convenience to our Members. Another way we enhance Membership value is through our private label offering, "Member's Selection®," a brand which is available only to PriceSmart Members. We believe the Member's Selection® brand carries goodwill and is recognized in our markets for value. Private label also provides us the opportunity to source quality items locally when appropriate. Select local sourcing has multiple benefits, including support of local communities in which we operate by enhancing business activity and creating direct and indirect jobs, mitigation of foreign currency exchange risk, and reduced supply chain exposure. These initiatives offer additional benefits and services for our Members, whether they choose to shop on-line, in-club, or both. Our private label sales penetration grew to 25.9% of merchandise sales in the first quarter of fiscal 2023, from 23.6% in the same period of fiscal year 2022, and we plan to continue to invest in the development of additional private label products under the "Member's Selection®" brand. 36
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Table of Contents III.Drive Incremental Sales via PriceSmart.com and Enhanced Online, Digital and Technological Capabilities. We recognize the growing expectation of consumers in our markets for alternative ways of shopping. As a result, we continue to improve the functionality and content of PriceSmart.com and to expand our product offerings available online. We also build and apply technological tools to continue to learn more about and strengthen our relationships with each of our Members. Using data analytics, we believe we have been able to provide our Members with enhancements to the membership experience. PriceSmart.com and these tools provide the opportunity for us to continually strengthen and expand the scope of our relationship with each Member and offer incremental products and services in the future. Our PriceSmart.com offering provides data that informs us regarding the potential viability of new clubs in new areas and offers us options to serve and expand into new markets without the need for a traditional brick & mortar club location. We also invest in technology to capture operational efficiencies and enhance our decision-making for the increasingly dynamic environment we are in.
Financial highlights for the first quarter of fiscal year 2023 included:
?Total revenues increased 8.1% over the comparable prior year period.
?Net merchandise sales increased 8.6% over the comparable prior year period. We ended the quarter with 50 warehouse clubs compared to 49 warehouse clubs at the end of the first quarter of fiscal year 2022. Foreign currency exchange rate fluctuations impacted net merchandise sales negatively by 2.3% versus the same three-month period in the prior year. ?Comparable net merchandise sales (that is, sales in the 47 warehouse clubs that have been open for greater than 13 ½ calendar months) for the 13 weeks endedDecember 4, 2022 increased 5.0%. Foreign currency exchange rate fluctuations impacted comparable net merchandise sales negatively by 2.1%.
?Membership income for the first quarter of fiscal year 2023 increased 7.5% to
?Total gross margins (net merchandise sales less associated cost of goods sold) increased 10.3% over the prior-year period, and merchandise gross profits as a percent of net merchandise sales were 16.2%, an increase of 20 basis points (0.2%) from the same period in the prior year. ?Operating income for the first quarter of fiscal year 2023 was$55.5 million , an increase of 20.7%, or$9.5 million , compared to the first quarter of fiscal year 2022. ?We recorded a$4.6 million net loss in other income (expense), net primarily from currency transactions in the first quarter of fiscal year 2023 compared to a$1.9 million net gain primarily from the disposal ofAeropost in the same period last year. ?Our effective tax rate decreased in the first quarter of fiscal year 2023 to 33.3% from 34.1% in the first quarter of fiscal year 2022. The decrease in the effective tax rate is related to the favorable impact from fewer valuation allowances we took on foreign tax credits that are no longer deemed recoverable and changes in uncertain tax positions. ?Net income attributable toPriceSmart for the first quarter of fiscal year 2023 was$32.9 million , or$1.05 per diluted share, compared to$30.5 million , or$0.98 per diluted share, in the first quarter of fiscal year 2022.
COMPARISON OF THE three months ended
The following discussion and analysis compares the results of operations for the three-month period ended onNovember 30, 2022 with the three-month period ended onNovember 30, 2021 and should be read in conjunction with the consolidated financial statements and the accompanying notes included elsewhere in this report. Unless otherwise noted, all tables on the following pages presentU.S. dollar amounts in thousands. Certain percentages presented are calculated using actual results prior to rounding. 37
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Table of Contents Net Merchandise Sales The following tables indicate the net merchandise club sales in the segments in which we operate and the percentage growth in net merchandise sales by segment during the three months endedNovember 30, 2022 andNovember 30, 2021 . Three Months Ended November 30, 2022 November 30, 2021 Increase/ (decrease) % of net from % of net Amount ?sales prior year Change Amount ?sales Central America$ 617,052 60.2 %$ 56,456 10.1 %$ 560,596 59.4 % Caribbean 302,864 29.5 34,530 12.9 268,334 28.4 Colombia 105,547 10.3 (9,566) (8.3) 115,113 12.2 Net merchandise sales$ 1,025,463 100.0 %$ 81,420 8.6 %
Comparison of Three Months Ended
Overall, total net merchandise sales grew by 8.6% for the first quarter of fiscal year 2023 compared to the first quarter of fiscal year 2022, driven by a 3.0% increase in transactions and a 5.5% increase in average ticket. Transactions represent the total number of visits our Members make to our warehouse clubs plus the number of Click & Go™ curbside pickup and delivery service transactions. Average ticket represents the amount our Members spend on each visit or Click & Go™ order. We had 50 clubs in operation as ofNovember 30, 2022 compared to 49 clubs as ofNovember 30, 2021 . Net merchandise sales in ourCentral America segment increased 10.1% during the first quarter of fiscal year 2023. This increase had a 600 basis point (6.0%) positive impact on total net merchandise sales growth. All markets within this segment showed increased net merchandise sales during the first quarter of fiscal year 2023. Net merchandise sales in ourCaribbean segment increased 12.9% during the first quarter of fiscal year 2023. This increase had a 360 basis point (3.6%) positive impact on total net merchandise sales growth. All of our markets in this segment had positive net merchandise sales growth. OurDominican Republic market continued its strong performance in the quarter with 19.6% growth. We added one new club to the segment when compared to the comparable prior-year period. We opened our second warehouse club inJamaica inApril 2022 . Net merchandise sales in ourColombia segment decreased 8.3% during the first quarter of fiscal year 2023. This decrease had a 100 basis point (1.0%) negative impact on total net merchandise sales growth. The primary driver of the decreased sales for the quarter was due to the significant devaluation of the Colombian peso during the past several months, which has negatively impacted sales in the first quarter of fiscal year 2023. The following table indicates the impact that currency exchange rates had on our net merchandise sales in dollars and the percentage change from the three-month period endedNovember 30, 2022 . The term "currency exchange rates" refers to the currency exchange rates we use to convert net merchandise and comparable net merchandise sales for all countries where the functional currency is not theU.S. dollar intoU.S. dollars. We calculate the effect of changes in currency exchange rates as the difference between current period activities translated using the current period's currency exchange rates and the comparable prior year period's currency exchange rates. We believe the disclosure of the effects of currency exchange rate fluctuations on our results permits investors to understand better the Company's underlying performance. Currency exchange rate fluctuations for the Three months ended November 30, 2022 Amount % change Central America $ (2,312) (0.4) % Caribbean 4,664 1.8 Colombia (23,568) (20.5) Net merchandise sales $ (21,216) (2.3) % 38
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Table of Contents Overall, the effects of currency fluctuations within our markets had an approximately$21.2 million , or 230 basis point (2.3%), negative impact on net merchandise sales for the three-months endedNovember 30, 2022 . Currency fluctuations had a$2.3 million , or 40 basis point (0.4%), negative impact on net merchandise sales in ourCentral America segment for the three months endedNovember 30, 2022 . These currency fluctuations contributed approximately 30 basis points (0.3%) of negative impact on total net merchandise sales for the quarter endedNovember 30, 2022 . The Honduran Lempira and Guatemalan Quetzal devalued significantly against the US dollar. This devaluation was partially offset by an appreciation in the Costa Rica Colón. Currency fluctuations had a$4.7 million , or 180 basis point (1.8%), positive impact on net merchandise sales in ourCaribbean segment for the three months endedNovember 30, 2022 . These currency fluctuations contributed approximately 50 basis points (0.5%) of positive impact on total net merchandise sales growth for the period. TheDominican Republic market experienced currency appreciation when compared to the same three-month period last year.
Currency fluctuations had a
Comparable Merchandise Sales
We report comparable net merchandise sales on a "same week" basis with 13 weeks in each quarter beginning on a Monday and ending on a Sunday. The periods are established at the beginning of the fiscal year to provide as close of a match as possible to the calendar month and quarter that is used for financial reporting purposes. This approach equalizes the number of weekend days and weekdays in each period for improved sales comparison, as we experience higher merchandise club sales on the weekends. Each of the warehouse clubs used in the calculations was open for at least 13 ½ calendar months before its results for the current period were compared with its results for the prior period. As a result, sales related to three of our warehouse clubs opened during fiscal year 2022 will not be used in the calculation of comparable sales until they have been open for at least 13 ½ months. Therefore, comparable net merchandise sales includes 47 warehouse clubs for the thirteen-week period endedDecember 4, 2022 .
The following tables indicate the comparable net merchandise sales in the
reportable segments in which we operate and the percentage changes in net
merchandise sales by segment during the thirteen-week period ended
Thirteen Weeks Ended
December 4, 2022 November 28, 2021
% Increase/(decrease) % Increase/(decrease)
in comparable in comparable
net merchandise sales net merchandise sales
Central America 8.0 % 14.1 %
Caribbean 6.6 5.0
Colombia (13.1) (2.8)
Consolidated comparable net
merchandise sales 5.0 % 9.4 %
Comparison of Thirteen-Week Periods Ended
Comparable net merchandise sales for those warehouse clubs that were open for at least 13 ½ months for some or all of the thirteen-week period endedDecember 4, 2022 increased 5.0%. Comparable net merchandise sales in ourCentral America segment increased 8.0% for the thirteen-week period endedDecember 4, 2022 . All of our markets inCentral America had positive comparable net merchandise sales growth and this increase contributed approximately 470 basis points (4.7%) of positive impact in total comparable merchandise sales for the period. Comparable net merchandise sales in ourCaribbean segment increased 6.6% for the thirteen-week period endedDecember 4, 2022 . The increase contributed approximately 190 basis points (1.9%) of positive impact on total comparable merchandise sales for the period. 39 --------------------------------------------------------------------------------
Table of Contents OurDominican Republic market continued its strong performance in the thirteen-week period with 19.2% comparable sales growth. OurU.S. Virgin Islands andBarbados markets also showed strong performance this quarter with 4.3% and 3.4% comparable sales growth, respectively. This strong performance was offset by ourJamaica market, which declined in comparable net merchandise sales by 6.9% for the thirteen-week period due to sales transfers from the existing club included in the comparable net merchandise sales calculation to new clubs not included in the calculation. Comparable net merchandise sales in ourColombia segment decreased 13.1% for the thirteen-week period endedDecember 4, 2022 . This decrease contributed approximately 160 basis points (1.6%) of negative impact in total comparable merchandise sales for the period. The decrease inColombia during the current quarter was primarily due to the foreign currency devaluation and sales transfers from existing clubs included in the comparable net merchandise sales calculation to a new club not included in the calculation.
The following tables illustrate the impact that changes in foreign currency
exchange rates had on our comparable merchandise sales in dollars and the
percentage change for the thirteen-week period ended
Currency Exchange Rate Fluctuations for the
Thirteen Weeks Ended
December 4, 2022
Amount % change
Central America $ (1,541) (0.2) %
Caribbean 4,777 1.7
Colombia (22,763) (19.6)
Consolidated comparable net
merchandise sales $ (19,527) (2.1) %
Overall, the mix of currency fluctuations within our markets had an
approximately
Currency fluctuations within our
Currency fluctuations within ourCaribbean segment contributed approximately 50 basis points (0.5%) points of positive impact in total comparable merchandise sales for the thirteen-week period. OurDominican Republic market experienced currency appreciation when compared to the same period last year. Currency fluctuations within ourColombia segment contributed approximately 240 basis points (2.4%) of negative impact in total comparable merchandise sales for the thirteen-week period. This reflects the devaluation of the Colombian peso's foreign currency exchange rate when compared to the same period a year ago. 40 --------------------------------------------------------------------------------
Table of Contents
Membership Income
Membership income is recognized ratably over the one-year life of the
membership.
Three Months Ended
November 30, November 30,
2022 2021
Membership
Increase/ income % to
(Decrease) net
from merchandise
Amount prior year % Change club sales Amount
Membership income -
Central America $ 9,525 $ 749 8.5 % 1.5 % $ 8,776
Membership income -
Caribbean 4,415 442 11.1 1.5 3,973
Membership income -
Colombia 1,955 (87) (4.3) 1.9 2,042
Membership income -
Total $ 15,895 $ 1,104 7.5 % 1.6 % $ 14,791
Number of accounts -
Central America 953,660 35,731 3.9 % 917,929
Number of accounts -
Caribbean 455,800 23,656 5.5 432,144
Number of accounts -
Colombia 347,739 6,327 1.9 341,412
Number of accounts -
Total 1,757,199 65,714 3.9 % 1,691,485
Comparison of Three Months Ended
The number of Member accounts as ofNovember 30, 2022 was 3.9% higher than the prior year period. Membership income increased 7.5% over the three-month period endedNovember 30, 2022 , compared to the prior-year period. Membership income increased across ourCentral America andCaribbean segments and decreased in ourColombia segment for the three months endedNovember 30, 2022 . The consolidated increase in membership income is due to an increasing membership base since the comparable prior year period. TheCaribbean had the largest increase in membership base in the first three months of fiscal year 2023 compared to the comparable prior year period with 5.5% growth, followed byCentral America with a 3.9% increase andColombia with a 1.9% increase. SinceAugust 31, 2022 , ourCentral America andCaribbean segments have increased their membership base and ourColombia segment has faced a decline in its membership base. We offer the Platinum Membership program in all locations wherePriceSmart operates. The annual fee for a Platinum Membership in most markets is approximately$75 . The Platinum Membership program provides Members with a 2% rebate on most items, up to an annual maximum of$500 . We record the 2% rebate as a reduction on net merchandise sales at the time of the sales transaction. Platinum Membership accounts were 7.9% of our total membership base as ofNovember 30, 2022 , an increase from 6.5% as ofNovember 30, 2021 . Platinum Members tend to have higher renewal rates than our Diamond Members.
Our trailing twelve-month renewal rate was 87.9% and 89.0% for the periods ended
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--------------------------------------------------------------------------------Table of Contents Other Revenue Other revenue primarily consists of non-merchandise revenue from freight and handling fees generated from the marketplace and casillero operations we sold inOctober 2021 , interest-generating portfolio from our co-branded credit cards, and rental income from operating leases where the Company is the lessor. Three Months Ended November 30, 2022 November 30, 2021 Increase/ (decrease) from Amount prior year % Change Amount Non-merchandise revenue $ -$ (3,307) (100.0) % $ 3,307 Miscellaneous income 2,397 351 17.2 2,046 Rental income 593 (42) (6.6) 635 Other revenue$ 2,990 $ (2,998) (50.1) % $ 5,988
Comparison of Three Months Ended
The primary driver of the decrease in other revenue for the quarter is due to the sale of ourAeropost subsidiary and its marketplace and casillero operations onOctober 1, 2021 . 42
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