pricesmart investor relations to psmt.pdf · pricesmart investor relations december 2016. 2 forward...
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PriceSmart Investor RelationsDecember 2016
2
Forward Looking Statements
This presentation may contain forward- looking statements concerning the Company's anticipated future revenues and earnings, adequacy of future cash flow
and related matters. These forward-looking statements include, but are not limited to, statements containing the words expect, believe, will, may, should, project,
estimate, anticipated, scheduled, and like expressions, and the negative thereof. These forward-looking statements include, but are not limited to, statements
containing the words “expect,” “believe,” “will,” “may,” “should,” “project,” “estimate,” “anticipated,” “scheduled,” and like expressions, and the negative thereof.
These statements are subject to risks and uncertainties that could cause actual results to differ materially, including the following risks: our financial performance
is dependent on international operations, which exposes us to various risks; any failure by us to manage our widely dispersed operations could adversely affect
our business; we face significant competition; future sales growth depends, in part, on our ability to successfully open new warehouse clubs and grow sales in
our existing locations; we might not identify in a timely manner or effectively respond to changes in consumer preferences for merchandise, which could
adversely affect our relationship with members, demand for our products and market share; although we have begun to offer limited online shopping to our
members, our sales could be adversely affected if one or more major international online retailers were to enter our markets or if other competitors were to offer
a superior online experience; our profitability is vulnerable to cost increases; we face difficulties in the shipment of and inherent risks in the importation of,
merchandise to our warehouse clubs; we are exposed to weather and other natural disaster risks; general economic conditions could adversely impact our
business in various respects; we are subject to risks associated with possible changes in our relationships with third parties with which we do business, as well
as the performance of such third parties; we rely extensively on computer systems to process transactions, summarize results and manage our business; failure
to adequately maintain our systems and disruptions in our systems could harm our business and adversely affect our results of operations; we could be subject
to additional tax liabilities; a few of our stockholders own approximately 26.0% of our voting stock as of May 31, 2016, which may make it difficult to complete
some corporate transactions without their support and may impede a change in control; failure to attract and retain qualified employees, increases in wage and
benefit costs, changes in laws and other labor issues could materially adversely affect our financial performance; we are subject to volatility in foreign currency
exchange rates; we face the risk of exposure to product liability claims, a product recall and adverse publicity; any failure to maintain the security of the
information relating to our company, members, employees and vendors that we hold, whether as a result of cybersecurity attacks on our information systems,
failure of internal controls, employee negligence or malfeasance or otherwise, could damage our reputation with members, employees, vendors and others,
could cause us to incur substantial additional costs and to become subject to litigation and could materially adversely affect our operating results; we are subject
to payment related risks; changes in accounting standards and assumptions, estimates and judgments by management related to complex accounting matters
could significantly affect our financial condition and results of operations; we face increased public company compliance risks and compliance risks related to our
international operations; if remediation costs or hazardous substance contamination levels at certain properties for which we maintain financial responsibility
exceed management's current expectations, our financial condition and results of operations could be adversely impacted. The risks described above as well as
the other risks detailed in the Company's U.S. Securities and Exchange Commission (“SEC”) reports, including the Company's Annual Report on Form 10-K filed
for the fiscal year ended August 31, 2015 filed on October 29, 2015 pursuant to the Securities Exchange Act of 1934.
The statements and information in the presentation are current only as of its date, and we do not undertake to subsequently update them.
This presentation may include certain non‐GAAP financial measures such as Adjusted EBITDA intended to supplement, not substitute for, comparable GAAP
measures. Reconciliations of non‐GAAP financial measures to GAAP financial measures are provided at the end of the presentation. Investors are urged to
consider carefully the comparable GAAP measures and the reconciliations to those measures provided.
For further information, please contact John M. Heffner, Principal Financial Officer and Principal Accounting Officer (858) 404- 8826
3
Introduction to Pricesmart
Company Overview 1
Current Business Update2
Appendix3
Company Overview
Our Heritage
5
6
Today, PriceSmart is a Leading Pan-Regional
Membership Warehouse Club Operator
Net Warehouse Sales Breakdown
U.S.-style Membership warehouse club operator
― First club opened in 1996 in Panama
― Company went public in 1997
― Nasdaq Global Select Market (PSMT)
Headquarters and primary DC in the U.S.
2.7Bn+ market cap
LTM Sales of $2.8Bn
― 94K total transactions per day
― Annual average sales: $74.6MM/club
39 warehouse clubs across 13 countries
― 2.9MM+ sq ft (48,000 to 100,000 per club)
― 82% of clubs’ real estate is owned
1.5MM membership accounts
― Over 2.8MM card holders
― 86% renewal rate in established markets
(excludes Colombia)
Business Overview (1)
Business
20%
Retail
80% Central America
61%
Note: (1) Data as of 11/30/16
Pan-Regional Presence
Guatemala (3)
El Salvador (2) Nicaragua (2)
Honduras (3)
Jamaica (1)
Dominican
Republic (3)
Barbados (1)
USVI (1)
Aruba (1)
Trinidad (4)
Colombia (6)
Panama (5)Costa Rica (6)
San Diego – Headquarters
Miami – Primary Distribution Center
Mexico – Distribution Center
Los Angeles – Distribution Center
Caribbean
29%
Source: Company estimates Source: 10-Q FY2017
Colombia
10%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Market Cap LTM Revenue7
Historical Perspective
($MM)
Market Cap
has increased
approximately
30x since 1998
1996-2002 Future2003-2005 2006-2010 2011-2016
Continue Investments
Additional capacity
Operational improvements
New warehouse clubs
― Established
markets
― Colombia
Rapid Unit Expansion
Established
presence in
Caribbean and
CEAM markets
Transition / Inward
Focus
Closed non-
performing clubs
Exited markets
(Philippines,
Guam, Mexico)
Focused on
merchandising,
operations and
membership
Recapitalization of
Company with
rights offering
Back to Organic
Growth
Added clubs in
larger markets
SSS growth of
20.1%, 8.7%, and
8.2% in 2008,
2009, and 2010,
respectively
Good Cash Flow / New
Markets
Entered Colombia
Expanded to 6
locations in the
country
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
($MM)
8
Attractive Warehouse Club Facilities
Exteriors Interiors
48%52%
9
Differentiated Merchandising Strategy
Consistent Brand Management
Successful Private Label Business Treasure Hunt Concept Drives Avg. Ticket
Multi-Sourcing / Multi-Category
53%
27%
11%
7%2%
Hardlines
Locally
Sourced
SundriesUS and
Internationally
Sourced
Food
SoftlinesOther
• Average of 2,200 SKUs per club
• 40 - 50% imported brands
• ~11.5% of sales
Picture 3
Sales Breakdown
Brand 4
Picture 3 Picture 3
10
Generating Membership Value and Loyalty
Membership Type
Membership Growth
Facts Description
13.0
8.010.0
16.1 16.013.5
7.9
25.7
0.475
80
85
90
95
100
2008 2009 2010 2011 2012 2013 2014 2015 2016
0.0
5.0
10.0
15.0
20.0
25.0
30.0
Total Membership Growth Renewal Rate
Targets higher income and upper-middle class
families
Over 2.8MM total cardholders
1.5MM total membership accounts
86% annual renewal rate (excluding Colombia)
Offers co-branded credit card in nearly all of the
Company’s markets at reduced or zero annual fee
Diamond
94% of Accounts
2.6MM cards
1.4MM membership
accounts
Annual fee of $35 (most
markets)
Business
6% of Accounts
0.2MM cards
0.1MM membership
accounts
Annual fee of $30 plus $10
for add-on memberships
Platinum
(Costa Rica)
Introduced in Oct. 2012
Annual fee of $75 with
2% rebate up to $500
Considering additional
country inclusions in
FY2017
Membership Growth (%) Renewal Rate (%)
Open 3 clubs
in Colombia
Note: 2016 Membership growth without Colombia: 5.4%
Current Business Update
Recent Financial Performance
For the Period Ending November 30, 2016:
― Net warehouse club sales increased 3.7% over the comparable prior year period.
― Membership income for Q1 increased 2.1% to $11.7 million
Total accounts grew 2.5% to 1,499,667
12-Month Renewal Rate of 82% (86% excluding Colombia)
― Warehouse gross profits as a percent of net warehouse club sales were 15.0%, an
increase of 45 basis points from the same period last year.
― Net income for the first quarter of fiscal year 2017 was $24.9 million, or $0.82 per
diluted share, compared to $23.7 million, or $0.78 per diluted share, in the
comparable prior year period.
― Cash and cash equivalents of $175.4 million
― Total debt of $84.5 million
12
Colombia Challenges
The devaluation of Colombia peso (COP) has
had a measurable effect on the consolidated
financial results of the Company
― Imported merchandise price increases impacts
demand
― Sales and Membership results are translated to fewer
US dollars
― US$ Sales declined 16% from last fiscal year
PriceSmart views Colombia as a very good
market for the Company in the long-term:
― We have been willing to accept lower margins
during this time of currency volatility to build
our business.
― Sourcing an increasing number of high quality
products within Colombia at a good value.
Locally sourced merchandise sales grew 5.3% in
Q1 (in COP)
― New member sign-ups at 3 of the Colombia
clubs were the highest of any of our clubs in
Q1.
― Expansion of warehouse club in Barranquilla
includes the addition of a parking deck.
― Colombia warehouse club #7 (Chia, north of
Bogota) opened in September
13
0
500
1000
1500
2000
2500
3000
3500
4000
AU
G
SE
P
OC
T
NO
V
DE
C
JAN
FE
B
MA
R
AP
R
MA
Y
JUN
JUL
AU
G
SE
P
OC
T
NO
V
DE
C
JAN
FE
B
MA
R
AP
R
COP to USD
FY2015 FY2016
E-Commerce Platform Enhancement
Colombia
14
Current Investments / Focus Areas
Distribution Network and Capabilities
Warehouse Club Capacity and Growth
15
Well-Developed Distribution Network
Five DC’s in North America, Costa Rica, Colombia,
Trinidad and Panama for imported merchandise
― Totaling approximately 450,000 square feet
― One DC located Mexico City to reduce cross-
border tariffs for certain items
― Costa Rica, Colombia, and Panama DC’s
enable direct shipments from suppliers
Core competency of international shipping and local
import logistics expertise
Managed sourcing logistics from over 20 countries
Executes over 20,000 ocean-container shipments
annually
Staff of 250 dedicated logistics associates in 13
countries
Recently announced the planned acquisition of
build-to-suit distribution center in Miami for
improved efficiency and long-term stability
Key Facts Distribution Network
USVI (1)
Barbados (1) Aruba (1)
Colombia (6)
Panama (5)Costa Rica (6)
Guatemala (3)
EL Salvador (2)Nicaragua (2)
Honduras (3)
Trinidad (4)
Dominican
Republic (3)
Jamaica (1)
Other / Regional DCsPrimary DC
Warehouse Club Growth
Newest warehouse club, #7 in Colombia,
opened at the start of FY2017
― September 1, 2016 opening
Looking to expand existing warehouse
clubs where the site allows for expansion
― Barranquilla, Colombia
Capital investment expected to be
approximately $130M in FY17.
16
Chia, Colombia
Barranquilla, Colombia
E-Commerce: www.pricesmart.com
17
Appendix
19
Historical Growth Performance
$Bn
Net Warehouse Club Sales (1)
1.1 1.2 1.41.7
2.02.2
2.42.7 2.8
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2008 2009 2010 2011 2012 2013 2014 2015 2016
$MM
Total Membership Income & Accounts (1)
16 18 20 2327
3438
44 46
0.6 0.7 0.7 0.8
1.0 1.1 1.2
1.5 1.5
0.0
1.0
2.0
0
10
20
30
40
50
200820092010201120122013201420152016
MM
Membership Fee Income Membership Accounts
# Warehouse Clubs
Total Units (1)
25 26 27 29 29 31 3337 38
0
10
20
30
40
50
2008 2009 2010 2011 2012 2013 2014 2015 2016
Notes: (1) Fiscal years
%
Same Store Sales Growth (1)
20.1
8.7 8.2
18.114.5
9
4.82.7 2.2
0
10
20
30
2008 2009 2010 2011 2012 2013 2014 2015 2016
20
Historical Earnings Performance
% %
EBITDA Margin (1)(2) EBIT Margin (1)(2)
%
ROIC (1)(3)
5.4 5.86.4 6.4 6.4 6.6 6.6 6.5 6.3
0
2
4
6
8
2008 2009 2010 2011 2012 2013 2014 2015 2016
4.44.7
5.3 5.2 5.35.6 5.5
5.3
4.8
4
5
6
2008 2009 2010 2011 2012 2013 2014 2015 2016
13.9 14.4 13.915.6 16.8 18.4 17.0 16.2 17.6
0
5
10
15
20
25
2008 2009 2010 2011 2012 2013 2014 2015 2016
Notes: (1) Fiscal years
(2) Excludes asset impairment and closure costs and provisions for pending litigation
(3) ROIC = EBIT * (1 - Effective Tax Rate) / (Net PPE + Net Working Capital + Goodwill)
$
Diluted EPS (1)
1.29 1.43 1.652.07 2.24
2.783.07 2.95 2.92
0
1
2
3
4
2008 2009 2010 2011 2012 2013 2014 2015 2016
21
Adjusted EBITDA Reconciliation