On Wednesday, PriceSmart (NASDAQ:PSMT) will release its quarterly report, and investors are hoping the warehouse-club operator will post a solid rebound after troubling performance earlier this year. Even though Costco Wholesale (NASDAQ:COST) and Wal-Mart (NYSE:WMT) have seen their own struggles to begin 2014, PriceSmart has lost more ground than its U.S. counterparts, and the question remains whether PriceSmart can keep growing aggressively to take advantage of emerging-market economies in Central and South America.

PriceSmart's history goes back to the original merger of Price Club and Costco back in the early 1990s, with PriceSmart having been spun off shortly thereafter with its international focus. PriceSmart hasn't grown as quickly as Costco and Wal-Mart's Sam's Clubs have, but many investors believe PriceSmart has the same future potential for growth that its counterparts once had, given PriceSmart's exposure to emerging markets. Let's take an early look at what's been happening with PriceSmart over the past quarter and what we're likely to see in its report.

Source: PriceSmart.

Stats on PriceSmart

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$676.19 million

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Can PriceSmart earnings get moving in the right direction?
In recent months, analysts have cut back on their views about PriceSmart earnings, reducing February-quarter estimates by $0.02 per share and reducing their full-year fiscal 2014 projections by a nickel per share. The stock has responded in kind, falling 12% since the year began.

PriceSmart's woes started early in the quarter, with the company's announcement of its fiscal first-quarter earnings sending the stock down sharply. Total revenue jumped 13%, producing a 7% rise in net income from the year-ago quarter on same-store sales growth of 7.9%. Yet those figures were less than what investors had hoped to see, and the announcement of December sales -- which fall in the February quarter that PriceSmart is about to report -- didn't inspire confidence either, as same-store sales rose just 6.7%.

Since then, PriceSmart has set the stage for a potential rebound. In January, comps came in up 8.4% from a year ago, although February figures showed just a 5.3% increase. Unlike many U.S. retailers, PriceSmart won't see the same winter-related issues that could hold back growth among its North American counterparts. Moreover, new warehouse openings show the slow but steady rise in store counts that has helped drive PriceSmart's long-term strategy forward.

PriceSmart has done a good job focusing on the same metrics that have helped its peers excel. In particular, membership renewal rates most recently came in around 85%, comparing well to Costco's worldwide figure of 86.4% and showing the devotion that customers have to the PriceSmart business model. That loyalty is critical to the company's profit margins, as it allows the warehouse club chain to offer goods at lower prices and rely more on the raw profit from membership fees that creates a beneficial network effect.

In the PriceSmart earnings report, watch to make sure the company keeps its gradual expansion on pace. Investors won't necessarily see the same growth trajectory its U.S. counterparts took, but eventually, PriceSmart should look a lot like its rivals to the north, and its stock price should reflect it.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Costco Wholesale and PriceSmart. The Motley Fool owns shares of Costco Wholesale. 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.

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