This Company Continues to Execute South of the Border

Every year, The Motley Fool comes out with a report on its "Stock of the Year." For 2012, that distinction went to PriceSmart (NASDAQ: PSMT  ) , a Latin American wholesaler that was born from the blueprint of Costco -- but focuses solely on the Caribbean, Central, and South America.

The company showed yesterday why it earned such a distinction. Read below to discover the three big drivers pushing this company forward.

Driving more traffic
One of the most important metrics for wholesale companies is the change in comparable-store sales. This is important because although sales were up an impressive 11.8% for PriceSmart last quarter, this could easily be the result of simply building more stores, not driving more traffic within existing stores.

Generally, anything above 5% growth in comparable-store sales is encouraging. Though it will eventually slow as comparisons from the previous years get more difficult, look and you'll see that PriceSmart has consistently existed well north of 5% comparative sales growth -- ringing in with a healthy 8.3% this year. 

Source: SEC Filings. 

As I said, it would be difficult for PriceSmart to continually show comparable-store sales growth near 20%, as it did last year. If the company can pull off anything between 5% and 8% for the next couple of quarters, that will be news to investors' ears.

Getting more people to join
Another reason shares of PriceSmart are up after earnings is because the company announced that the yearly membership fees increased an impressive 21.2%. Before jumping out of your seat from such a big number, you need to realize that the average annual membership increased in price from roughly $30 per year to $35.

Had the price been held constant, the increase would have been 14.4%. Though that might not be as impressive as 21%, it still shows significant momentum working in PriceSmart's favor. Membership fees are also crucially important for wholesalers, as these companies try to make their products as cheap as possible, earning only pennies on the dollar. The profit comes from the volume of purchases, combined with the yearly membership fees.

An expanding footprint
But possibly the most tantalizing storyline has to do with PriceSmart's push into South America.

In many Latin American countries, the warehouse version of retailing has not reached the proportions it has stateside with the likes of Costco and Wal-Mart's Sam's Clubs. That's important to recognize, because for all the attention we gave PriceSmart last year, it only has 30 operational warehouses in the world right now.

Up until last year, none of those stores was in South America -- which boasts a population of almost 400 million and several growing economies. While Wal-Mart has a defined presence in Brazil, and France-based Carrefour has a footprint in the continent as well, there's still a lot of room for wholesale membership clubs to move in.

That's exactly what PriceSmart has done, first in Barranquilla, Colombia, in 2011. Within the last three months, a second store opened in the city, this time in Cali -- with another planned to open in the city in 2013.

The company has done a good job of expanding slowly and deliberately -- not biting off more than it can chew at one time. There's still a lot of room for growth in the region, though competition is likely to heat up.

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