Q2 2020 Earnings Call

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for opening remarks. I'll be able to turn the call over to price price Mart's Chief Financial Officer Michael mccleery, please proceed sir.

Thank you and welcome to the price part earnings call for the second quarter of fiscal year 2020. We will be discussing the information that we provided in our earnings press release and our 10-q which were both relieved yesterday afternoon, April 8th 2020.

You can find both documents and our investor relations website at investors where you can also sign up for email alerts.

As a reminder all statements made on this conference call other than statements of historical fact are forward-looking statements concerning the company's anticipated future plans revenues and related matters.

Forward-looking statements include but are not limited to statements containing the words expect believe we'll May should estimate and similar expressions.

All forward-looking statements are based on current expectations and assumptions as of today April 9th 2020.

These statements are subject to risks and uncertainties that could cause actual results to differ materially including the risks detailed in the company's annual report on form 10-K for the fiscal year in August 31st, 2019 as filed with the Securities and Exchange Commission on October 29th, 2019, and the company's quarterly report on form 10-q for the quarter ended February 9th, 2020 as filed with the Securities and Exchange Commission on April 8th, 2020. The company undertakes no obligation to update forward-looking statements made during this call.

Now I will turn the call over to Chevy there and Biggie price Parts chief executive officer.

Good morning, everyone and thank you Michael and the spirit of not taking anything for granted. I want to thank everyone involved with this call who's made it possible to connect with our investors and our analysts so that I can inform you about our company's results for Q2 as well as tell you about our current activities. Although we're conducting this call from remote locations. I want to welcome Michael McClure offer a special ongoing Chief Financial Officer Michaels done. An excellent job is our interim CFO since December 10th, 2019. He's been with the company for sixteen years and he has extensive experience with our business and our leadership team. You know, they they say you really get to know a person's true Colours in times of Challenge and stress cracks events of the last couple of months have revealed many more of Michael's great qualities.

So no.

Normally I get right to sharing with you insights on key events that influenced our most recent quarterly results our business end of the second quarter of fiscal year twenty-twenty with strong results and Thursday momentum. We were seeing benefits from many of the initiatives that we've been working on for the last year and we were feeling pretty well positioned for what we thought the rest of this year was look like off then just about a couple of weeks into the our third quarter in March the World Health Organization recognizes the novel strain of coronavirus covid-19, as a pandemic off. This virus has caused a global disruption that has touched every one of us in some matters, including our employees and members across thirteen countries.

So by March it was clear to us the world had changed and our Focus quickly shifted to five main priorities.

Give me so priority number one first and foremost in his always protect the safety and well-being of our employees in our members and now more than ever in the face of expanding a priority to take additional steps to ensure continued operations without disruption priority, three take proactive measures to protect our supply chain a priority for get moving quickly on key projects, especially those that could expand online capabilities and find new ways to meet member demand, which was changing in response to this virus.

And priority 5 manage cash and capital resources in the face of a much much less predictable climate.

We're now into this for a little over a month and as often happens in times of Crisis and necessity. We're actually finding opportunities. We're pushing actions new ideas and thoughts that I believe will help us shape the future of our business in very positive ways.

The following is a summary of some specific actions we've taken in response to the codes outbreak. So as to Priority One and Two are employees members and continued operations team. We quickly off-site it employees whose functions to be performed remotely with many of our key Executives taking extra precautions. This was done. Well before government mandates, and we've been able to continue offering all operations from off site since approximately the second week of March.

In February, we had assembled a task force representing leadership covering all aspects of our business. This leadership team is one hundred percent on tasks and communicate 7 days a week every day. We review in detail and plan for all of the developments in each of our 13 markets.

Governmental authorities in our markets has imposed or are experimenting with policies or restrictions affecting the retail sectors of our market and many of these have resulted in limiting access for our membership in impacting our club operations these limitations and restrictions change day-to-day and Vary from Market to Market, but our team stands ready to respond real time and is Nimble and find ways to continue to serve our members while abiding by local laws and regulations.

at the club level and throughout our

Distribution centers we've implemented safety protocols to protect our Gyros are employees were face to face with the public there on the front line providing Goods, too are that are members really need money. We're taking preventive measures such as providing personal protective equipment for them were installing sneeze guards for the cashiers. And another member facing areas. We reduced or removed in club Food Service. We're eliminating food sampling were educating our employees about best practices for good hygiene increasing cleaning and sanitizing protocols employing social distancing is taking temperatures and mapping contacts. That's just to name a few. We don't allow employees to exhibit symptoms or live or who live with people that are showing symptoms to come to work and we've modified are sick leave policy to make sure that people can take paid time off without any concern about being absent.

We're also preparing for the unknown. We're building Reserve teams who don't overlap with other employees so that they can step in as needed.

We report and are transparent with our employees are members and the public when we're notified of a confirmed coded case and we follow health authority guidelines for quarantining and contacts mapping.

Thankfully today we're only aware of a few confirmed cases among our approximate 9,000 employees and we're really doing whatever we can to keep that number as low as possible, but we're getting prepared if circumstances changed.

Our third Focus protecting our supply chain, our merchandising and distribution teams are working with suppliers to make sure items are available. And by the way, I'd like to also recognize express my gratitude to our suppliers and our vendors because we're really working together to get through the unexpected.

We closely monitor inventories in our supply chain and Upstream while we've experienced some out of stocks on certain items. We generally been able to maintain adequate levels on a majority of our life a product that are members need but that's a dynamic situation and we have to keep monitoring it very carefully.

And we have a contingency plan actually a couple in place in the event that a country or region of strategic importance to our inventory flow is negatively impacted by the pandemic or they're experiencing related restrictions. Our distribution centers outside of the United States, especially the Costa Rica Regional Distribution Center. I played an important role in providing optionality and reducing the risk of interruption to the flow of critical merchandise to our markets.

Replace limits on the quantity of certain key items that members can purchase such as cleaning supplies paper products and course shelf-stable groceries so that these essential products are available to as many as possible and at some clubs we've created dedicated shopping hours for our employees as well as for seniors and other individuals most at risk.

Our our Ford Focus is you know Court meeting the demands of our members over the last few weeks. We've expedited our adoption of technological innovation and rapidly accelerating beta initiatives that allow our members to continue to shop while reducing the need for physical contact.

I'm pleased to announce that we successfully launched our online catalog that enables our members to see almost real-time the availability of products for all clubs.

Then leveraging this capability and two best accommodate our members within the restrictions. We've already launched our first click and click and go program in Costa Rica. Our marriage can go online. Look at the catalog of products in the club order them pay online drive to the club and have the goods placed in their car producing almost any physical interaction with employees. This is being rolled out very quickly to our other markets as well in tandem with this we're enhancing Our member experience and increasing our digital connections with our members off to our new price smart app, which are members seem to like is we're seeing a rapid increase in the number of sign-ups and renewals using the app the talent and Technology. We obtained through Chrysler. It's a commission of Aro post has proven to play a very important role in enabling these capabilities in this compressed period of time,

At some club. We also provide assisted shopping which allows a member to order order by phone for pick-up or for delivery. We've increased our capacity for delivery by our own employees as well as through delivery services. In fact in one country where retailers were ordered to temporarily closed the government granted PriceSmart permission to co-operate is a drive-through to provide pre-built basic commodity bags that we call Smart bags while requiring minimum time or physical contact between the employee and the member that we're also working to deploy our Workforce in a thoughtful manner including by developing a program to teach employees skills so that they can support our efforts to provide members with additional alternative ways to shop

PriceSmart is also working with nonprofits including price philanthropies to provide these basic Commodities smart bags to people in need and to support the communities in which we operate.

I'm so incredibly proud of how our team is quickly adapted and is creatively responding to the challenges. We're facing while preparing for what might be next.

R. V Focus cash management given the uncertainty surrounding the potential impact of the outbreak on our results of operations and cash flows. We are proactively taking so long to access and preserve cash available on hand. We've also decided to delay certain Capital expenditures. We plan to complete the construction of our our warehouse club in Liberia Costa Rica next month, but we postponed its opening with respect to our previously announced future Warehouse Club openings on land that we've acquired in Bogota and we've got a manga Colombian in Jamaica House we decided to suspend or not initiate the construction of those clubs for the time being.

The reality is we really don't know.

Yes how long the situation will continue so we've curtailed discretionary spending and are considering and planning for additional cost-saving measures in the US and in the markets where we operate round here more about managing our liquidity from Michael. So now with that let me turn to the original purpose of this call our FY 2022 results.

total revenues were a new record for the company of nine hundred six point seven million dollars an increase of 6.1% over the comparable prior-year. Net merchandise sales were down and seventy one point seven million dollars an increase of 6.3% over the prior year. We did benefit from the extra day in this leap year the second quarter increase resulted from a 5.9% increase in transactions and a point three-per-cent increase in average ticket currency fluctuations in our Market had a 2.9 Million dollar or Thursday at this point three-per-cent negative impact on net merchandise sales for the quarter comprable net merchandise sales increased 5.4% with currency fluctuations impacting couple sales negatively by 4% by segment in Central America where we had twenty-five clubs at quarter-end net merchandise sales increased 8.3% with a one

Percent increase incomparable net merchandise sales the impact of currency on total and comparable sales to the Central American segment was positive 1.6% and positive 1.7% respectively.

All markets within the segment showed increased net merchandise sales year-on-year in Panama. We opened our 6 Club in May 2019 and 7th Club in October 2019. And in Guatemala. We open Dark Horse Club in November 2019 are comparable store merchandise sales were negatively impacted by these three new club openings.

In the Caribbean region where we have 13 clubs at quarter-end total net merchandise sales grew 4.9% with comparable net merchandise sales growth of 1.3% are Dominican Republic as you make a market led the way in the segment with 17.4% and 10.5% growth for the second quarter ended February 29th, 2028.

In the Dominican Republic this growth was primarily attributable to the opening of our V Club in June 2019 while in Jamaica strong comparable net merchandise sales growth was the primary driver of growth for the second quarter and Recovery 2920 to make a it's at a new all-time monthly sales record for the company off their Bakery alone. Did one point six million dollars in sales in the month of December another record, which is enabled in part by the investment. We previously made to expand the club and add parking.

the impact of

Currency on both Total and comprable merchandise sales for the Caribbean segment was negative 2%

in Columbia where we have seven clubs that merchandise sales grew 2% for the quarter and there was a decrease in comparable net merchandise sales at 6%

the impact of currency on total and comparable net merchandise sales and Columbia was significant at negative 6.1% and -6.4 percent off respectively.

With regard to merchandise in terms of Consolidated Consolidated merchandise categories, we experienced good growth in our fresh category driven primarily by gross and are prepared foods poultry and produce department. We also saw favorable growth and departments such as pet supplies toys tires and Sporting Goods. However, we still have room for improvement and several other categories that include juices and drinks Health Beauty as well as electronics and and the appliances category Within hard-line.

Now let's turn a membership at the end of Q2. We continue to report very positive results. We ended the quarter with approximately one point seven million account also a new company that record and a 3% increase over the prior year. Membership income was up by 9.7% during a quarter the growth in accounts and income during this whole twenty-twenty can be primarily attributed to the opening of four new Warehouse clubs compared to last year in our Central American and Caribbean Market membership income and are Columbian Market has also been impacted by a 20% increase in the diamond membership fee beginning in April 2019 are trailing 12-month renewal rate was 86% and 85% for the periods ended February 29th, 2020 and February 28th, 2019, respectively.

are platinum membership which offers cash back based on purchase volume in exchange for a higher annual fee represents approximately 4.5% of our total membership base and has been throwing