An International Stock for Your Watchlist

My spouse and I have recently been spending a lot of time in Costa Rica. When we need new quality luggage or have to buy an air mattress because family will be visiting, there's one place we know will have what we need: Pricesmart (Nasdaq: PSMT  ) .

The stock deserves a place on your watchlist because it gives you international exposure while banking on a growing baby-boomer trend.

First, a little history
Originally founded as Price Club in the 1970s, this company was in the wholesale business long before Costco (Nasdaq: COST  ) , BJ's Wholesale (NYSE: BJ  ) and Wal-Mart's (NYSE: WMT  ) Sam's Club were even on the scene.

In 1993, the Price family decided to merge their chain with Costco. A year later, Costco spun off their international rights into what is today's Pricesmart. Motley Fool co-founder Tom Gardner has made Costco one of his core holdings on the Stock Advisor service, so the fact that Costco DNA continues to be a part of Pricesmart bodes well for investors.

Today, Pricesmart operates 28 locations in 12 countries throughout Central America and the Caribbean. They also plan on expanding to South America with a location in Columbia this year. Such a move could be the start of expansion into the continent, which could drive growth for years.

A distinct clientele
If Pricesmart members were just like their counterparts in America, you would expect to see many middle- to upper-class local residents joining the club. In reality, the demographics of Caribbean and Central American nations are vastly different than in the U.S. Only the truly wealthy find it beneficial to pay for membership. In addition, the price of goods isn't normally what attracts buyers to the store; taxes on imports usually make Pricemart's offerings more expensive than if they were bought in the states.

What, then, is the draw for customers? It's simply that Pricesmart is the only place where customers can find certain products that are normally available in America. This, therefore, leaves North American ex-patriots -- particularly baby boomers retiring to a warmer climate -- as the demographic to focus on for continued growth.

According to CBS' MoneyWatch, a bit more than 500,000 retirees currently live abroad. With 79.6 million baby boomers looking to retire in the coming years, that number will increase dramatically. Central American and Caribbean nations offer affordable health care and living expenses compared with the United States. If you consider the fact that nearly half of the baby boomers haven't saved up enough to live stateside and maintain their standard of living, you've got an undeniable trend on the horizon. When these people need the goods they're used to but can't find them at the corner store, they'll be heading to Pricesmart.

More Retail Foolishness:

Fool contributor Brian Stoffel owns shares of Costco. Costco is a Motley Fool Stock Advisor selection. Costco and Wal-Mart are Motley Fool Inside Value selections. Wal-Mart is a Motley Fool Global Gains selection. The Fool owns shares of Costco Wholesale, and Wal-Mart Stores. 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 Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (10)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 05, 2011, at 11:32 PM, mattinnicaragua wrote:

    I live in Nicaragua and shop at the Pricesmart in Managua. Every time I shop there it is packed. They also have a new service. You can order things online and they will import then for you from the States. They handle all the import duties and taxes, all you have to do is pick it up at the store. This is a great service since it is such a pain to get things through customs here, not to mention time consuming. I expect this service to add to their bottom line once it catches on.

  • Report this Comment On January 06, 2011, at 7:37 AM, brewersfan81 wrote:

    mattinnicaragua,

    Thanks for your input. It's good to know that your experience in Nica is similar to what I've had in Costa Rica.

    Brian Stoffel

  • Report this Comment On January 06, 2011, at 2:33 PM, GSpot1 wrote:

    Brian,

    I appreciate the first hand comments. Pricesmart has been on my watchlist for awhile - probably should have bought already. I think my hesitation to invest comes in part from not being able to see the store in action.

    A couple of questions: How does the size of the store compare to the big box or warehouse stores in the US? Also, based on your own experience, do you have any guess as to what portion of the customers are ex-pats? Just curious what you've seen. Thanks!

  • Report this Comment On January 07, 2011, at 4:53 PM, brewersfan81 wrote:

    GSpot1,

    It's been a while since I've been in a Costco, but Pricesmarts are large, if not exactly as large as a standard Costco stateside. As far as members go, there is a mix of both ex-pats and locals. I wouldn't dare to venture a guess, but they are usually located in wealthy neighborhoods, giving access to both ex-pats and well-to-do locals.

    Suffice it to say that if ex-pats dropped off their membership list, business would suffer greatly!

    Brian Stoffel

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