PriceSmart’s Lackluster Quarter

Why Wall Street Isn’t HappyWhile PriceSmart met earnings expectations, it missed on revenue and has shown a steady decline in same-store sales.

Steady Decrease in Same-Store Sales

Why the Drop?

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1. Management has stated that the opening of new stores in Costa Rica and Honduras were going to shrink same-store sales while boosting overall sales. This was because the new stores would cannibalize the older stores.

2. The company has produced years of high single-digit and low double-digit growth. That pace can’t be held up forever.

A Buying Opportunity?

PriceSmart’s P/E Hasn’t Been This Low Since Mid-2011

The Bullish Argument

There are two key things to keep in mind:1. The real growth story comes from opening up

stores in South America, where the company is doubling its presence by year’s end.

2. With only 31 stores in the comparative base, it’s easy for one or two stores falling behind to make a big difference in overall same-store sales.

What to Beware Of

If they only grow at 1% per year, this stock isn’t worth 28 times trailing earnings.

Same-Store Sales

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