What: International warehouse club PriceSmart's (PSMT -2.34%) stock rose 11% during the month of October, according to S&P Capital IQ data. The bounce left shares just shy of reaching positive territory for 2015, and so PriceSmart remains a slight underperformer compared to the broader market this year.
So what: To be sure, PriceSmart benefited from the market's 8% surge in October. But the retailer also issued good news to investors, in the form of a third-quarter earnings report, late in the month.
Image source: PriceSmart.
PriceSmart posted a 13% sales improvement and 17% higher membership income for the three-month period ended Aug. 31. Both of those reported figures would have been substantially higher, if not for a huge currency devaluation in PriceSmart's Colombian market.
Still, its membership ranks swelled by 26%, thanks in part to three additional warehouses in Colombia, but also to growing subscriber gains across its store base. The company managed a 15% customer traffic boost overall as its membership renewal rate inched up to an impressive 86% from 84% a year earlier.
Now what: In early November, PriceSmart opened a new warehouse in Nicaragua, bringing its total count to 38 locations spread across Latin America and the Caribbean. That growing store base should keep pushing revenue and membership income higher. In addition, we know that the fourth quarter is off to a decent start in terms of growth at existing locations: On Nov. 6 PriceSmart announced that comparable-store sales for the month of October rose by 3.2%, which was on par with the 3.4% it logged through the last quarter.
Yet the Colombian currency devaluation is still expected to pressure reported profits and sales growth. It even impacts membership income: The price of a Colombian PriceSmart subscription, expressed in dollars, has fallen from $35 last year to $20 at the end of the quarter.
Meanwhile, management is focused on improving its inventory selection, handling, and distribution, to put the retailer in the best possible position ahead of this critical holiday season. Despite currency pressures, executives sounded optimistic that those initiatives will pay off. "All 37 of our clubs and even our new club in Managua, Nicaragua, are ready with a full selection of exciting holiday merchandise," CEO Jose Luis Laparte told investors in a conference call. "We now have domestic distribution centers in a few countries that allow us to better manage our inventory as we keep growing our volume in our existing clubs," he said.
