Why PriceSmart, Inc. (NASDAQ: PSMT) stock is trading strong

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PriceSmart, Inc. (NASDAQ: PSMT) stock rose 2.3% on July 11th, 2019 (Source: Google finance)

The company in the third quarter of FY 19 has reported the 25% fall in net income to $14.1 million due to higher costs and expenses despite higher revenue. The bottom line came in line with the analysts’ expectations while the top line missed consensus estimates. The net income were negatively impacted by costs related to investments to expand its omnichannel capabilities combined with net operating results of the Aeropost legacy business.

Moreover, the total revenue of the company increased by 0.8% year-over-year to $788.6 million. Net merchandise sales increased by 0.6% as foreign currency exchange rate fluctuations negatively impact the sales by 3.7%. Comparable net merchandise sales, for the 40 warehouse clubs that have been open for greater than 13 ½ calendar months, declined by 0.8% year-over-year. Foreign currency exchange rate fluctuations impacted comparable net merchandise sales negatively by 3.8% versus the previous year quarter.

The company had 42 clubs in operation as of May 31, 2019, compared to 41 warehouse clubs in operation as of May 31, 2018. The company continues to explore and negotiate for other potential sites for future warehouse clubs in Central America, the Caribbean, and Colombia. on June 27, 2019, the Company opened a new warehouse club in Santo Domingo, Dominican Republic, bringing to 43 the total number of warehouse clubs in operation by the Company. This warehouse club is the Company’s fifth warehouse in the Dominican Republic. The Santo Domingo location is the Company’s second new small club format, following the one opened in May 2019, in Santiago de Veraguas, Panama, and it is our first new small club format in a densely populated urban area.

Meanwhile, for the month of June 2019, net merchandise sales increased 3.9% to $253.1 million from $243.7 million in June a year earlier. Foreign currency exchange rate fluctuations impacted net merchandise sales negatively by $7.6 million or 3.0% versus the same prior year one-month period. For the four weeks ended June 30, 2019, comparable warehouse sales for the 40 warehouse clubs open at least 13 ½ full months increased 1.9% compared to the same four-week period last year. Foreign currency exchange rate fluctuations impacted comparable net merchandise sales negatively by $6.8 million or 3.1% versus the same prior year period.

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