PriceSmart Shares Got Crushed: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of retailer PriceSmart (Nasdaq: PSMT  ) were crushed, falling as much as 20% today after the company released earnings.

So what: Net sales increased 24% to $478.7 million and net income was $14.0 million, or $0.47 per share, down from $0.50 per share a year ago. Analysts had expected earnings of $0.58 per share on revenue of $472.5 million.

Now what: An earnings disappointment like this will quickly send shares to the doghouse, and that’s exactly where PriceSmart is today. The company pointed to a $0.04 per-share loss on currency translation as one of the reasons the company fell short of estimates. I’m encouraged by the growth rate, but with the stock trading at a 29 P/E, multiple earnings need to be climbing for this Fool to get excited about PriceSmart.

Interested in more info on PriceSmart? Add it to your watchlist by clicking here.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

Motley Fool newsletter services have recommended buying shares of PriceSmart. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (9) | Recommend This Article (8)

Comments from our Foolish Readers

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  • Report this Comment On January 06, 2012, at 3:24 PM, Yakush wrote:

    "multiple earnings need to be climbing for this Fool to get excited about PriceSmart."

    Really? then how do you explain "The Motley Fool's Top Stock for 2012"?


    I acted on this article that was sent to me two days ago and bought a chunk of this dog at $69.57... :(

  • Report this Comment On January 06, 2012, at 3:27 PM, TMFCheesehead wrote:


    I still think the long-term thesis is well intact. The underlying business continues to grow quite well. A look at the earnings statements will tell you two things account for more costs than in the past:

    1) The are charging lower margins to drive traffic as they expand.

    2) There are significant costs associated with setting up shop in Barranquila and Cali in Colombia. Once they are set up, they will have direct access to this growing economy, and they are financing this growth through their own cash flow (and not taking out debt to do it).

    Brian Stoffel

    Long PSMT

  • Report this Comment On January 06, 2012, at 10:25 PM, Pandorabelle wrote:

    TMFCheesehead/Brian ~

    Your positive points are valid, and yet the market went on a selling frenzy. What is your explanation for this contradiction?

    I am a long time subscriber to several TMF services and I don't think I will renew any after this recent pump to dump on PSMT.

  • Report this Comment On January 07, 2012, at 12:19 AM, Domeyrock wrote:

    That's nothing! Try owning the KFC of China for a few weeks before their CEO decides to leave for "personal reasons "

  • Report this Comment On January 07, 2012, at 1:18 AM, TMFCheesehead wrote:


    To me, this is simply the difference between have a long-term, buy-to-hold time horizon vs. a short-term show-me horizon.

    For sure, it will be months before we know how well business is going in Colombia, and whether or not lowered prices are driving traffic in stores.

    Short-term investors don't want to stick around for that uncertainty, and would gladly like to follow stocks trending higher. But if you're investing with a 3-5 year time horizon, you see that there's plenty of time for PSMT to prove their method--both in terms of lowering prices to drive traffic, and in terms of expanding into South America.

    Of course, time will tell whether or not this thesis plays out, but with the 24% jump in sales, there's absolutely no evidence to suggest otherwise.

    Brian Stoffel

  • Report this Comment On January 07, 2012, at 1:22 AM, SirGalahad71 wrote:

    I'm with Brian on this one. It's unfortunate that Yakush got bitten just after making his buy, but this stock is bound to come back and will be going steadily up. (Small hiccups not withstanding.)

    I plan on gettting onboard as soon as the market opens, At a price $9 lower. Sorry Yakush.

  • Report this Comment On January 07, 2012, at 11:38 AM, bettor2win wrote:

    Hey yakush I got bit by that bug too. Im really not worried. I figured with a company like this expanding throughout the Latin America region is going to cost a lot of $$$ since they arent just opening new stores in the next closest city, it cost a lot to do these things.

    This is a long term stock that can go places I believe though.

    Fool on HOMIES!

  • Report this Comment On January 09, 2012, at 2:00 AM, cattywampus wrote:

    @ Yakush, I wouldn't be to quick to bail on (PSMT) Last earnings report they fell 24% and recovered intraday, if I remember correctly. A roller coaster ride for sure. MF's pick is for the whole year in their defense, but they could have put that caveat in the report. Some people must have got in cheap when it fell under $57.00, but who knows, I could be wrong, it might go lower on Monday. I still think the thesis is good, Latin America looks to be the best growth area this year.

  • Report this Comment On January 12, 2012, at 10:06 AM, Bonmotten wrote:

    One would not mind a bad call quite so much if it had it not been so hyped up in the first place. The language in the Fool's reports is unnecessarily up-beat, over-stated and reminiscent of a half-hour infomercial. A little more objectivity would go a long way. A concluding paragraph or two of pros and cons should be included in all articles

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