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I Failed You On This One

Jul. 06, 2017 10:19 AM ETPriceSmart, Inc. (PSMT)8 Comments


  • Q3 earnings are out and the stock is taking it on the chin.
  • We discuss the results relative to performance when we first got behind the name.
  • It is not the first bad call, and it won't be the last.

PriceSmart (NASDAQ:NASDAQ:PSMT) has just reported earnings and is taking it on the chin this morning with the results it posted. This is a name that I have not touched upon since covering once back in summer of 2015 where I assigned a buy to it around the $90 mark. It has gone nowhere since then as shown in figure 2, and following today’s action, will be a clear-cut loser. Now briefly, the name caught my eye given the selling, but I am still willing to bet that this is a company most of you have probably never heard of. Essentially it owns and operates membership shopping warehouse clubs in Latin America and the Caribbean. To tell you the truth it operates much like a Costco or a Sam’s Club. With Amazon out there taking over the world it seems, even warehouse clubs have felt the pinch a bit. So, the question is how is PriceSmart performing?

Figure 2. 5 Year Stock History of PriceSmart

Source: Google Finance

Well over the last few quarters it has been hit or miss. Its third quarter saw decent sales and comps. I think the growth is steady, but not too strong. In other words, I don't think it is in hyper-growth mode. However, when I initiated a buy, the growth was much more pronounced. Now, in all honesty I tend to avoid these types of companies, so-called warehouse clubs. They are finicky and tough to predict. Sure money can be made in them, but a cursory historical glance of results versus estimates illustrates this point.

Turning to the present quarter, PriceSmart's net warehouse club sales increased 3.8% to $701.7 million from the $684.5 million in the third quarter of 2016. Total revenues for the third quarter were $730 million compared to $704 million in the comparable period of the prior year. How

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