Q4 2020 PriceSmart Inc Earnings Call
Good morning, or afternoon, everyone and welcome to Pricesmart incorporated earnings for lease conference call for the fourth quarter of fiscal year 2020.
Which ended on August 31, 2020.
After remarks from our company's representative.
Sure He Baron de de <unk>, Chief Executive Officer, and Michael Mcclary, Chief Financial Officer, you will be given an opportunity to ask questions as time permits.
As a reminder, this conference call is limited to one hour and is being recorded today Friday October Thirtyth 2020.
A digital replay will be available following the conclusion of todays call through November 620, 20 by dialing 1877.
344.
Seven five to nod for domestic callers or.
A one for one two.
317.
0088 for international callers.
By entering replay access code 101476.
Two.
For opening remarks, I would like to turn the call over to price Spartz Chief Financial Officer.
Michael Macquarie. Please proceed sir.
Thank you and welcome to the <unk> earnings call for the fourth quarter of fiscal year 2020.
We will be elaborating on the information that we provided in our fourth quarter earnings press release, which we released yesterday afternoon October 29 2020.
You can find this document on our Investor Relations website.
That's true stock price Mark Dot Com, 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.
Our forward looking statements concerning the companys anticipated plans revenues and related matters.
Forward looking statements include but are not limited to statements containing the words expect the lease will may should estimate and similar expressions.
All forward looking statements are based on current expectations and assumptions as of today October Thirtyth 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 most recent annual report on form 10-K.
These risks may be updated from time to time and other filings with the FCC, which are accessible on the assay seems website at www <unk> SCC got caught.
The company undertakes no obligation to update forward looking statements made during this call.
Now I will turn the call over to Sherri Darn Big price Hearts, Chief Executive Officer.
Thank you Michael Good day, everyone and thank you for joining us.
I hope that you and your families are all safe and healthy many people in businesses worldwide are struggling as this pandemic continues to take its toll on our thoughts are with all those impacted by call. It 19, and as a company we're committed to working through these challenges to do our part to improve the circumstances.
Turning to our results.
We were off to a strong start at the beginning of fiscal year 2020, as we began to see the impact of many new practices modifications and improvements that we had set into motion during the prior year. These.
These actions were largely driven by our rig commitment to vigilantly executing on the fixed rights of merchandising.
As our fiscal year continues like everyone else, we were faced with the impact of the pandemic and without delay, we pivoted to anticipate and implement the changes in interventions required to protect our people and our business.
Improved productivity, you're thinking and additional capabilities have grown out of that process, which has allowed us to now share with you solid results for the fiscal fourth quarter and full year.
I'm pleased to report that we wrapped up the fiscal year stronger than originally anticipated despite significant and shifting headwinds, which continually varied amongst our three markets.
As mentioned in previous calls our priorities at the beginning of the pandemic remain the same today.
We're focused on people apply supply chain demand and cash management.
But as we've adapted to this continuing crisis with creative solutions. We're now focused on our opportunities for the future of our company and the post Colgate World.
As to people plans for returning to work continue to evolve, but one thing I can tell you for sure. It will not be the same we're working on plans to develop greater flexibility fortify security enhanced productivity enrich quality of life and potentially save on inefficient travel and real estate.
That's it.
Emphasis continues on leading in our markets on safety protocols. So our members can trust that we remain vigilant and transparent.
We continue with our frequent action taskforce team meetings comprised of top executives responsible for overseeing all aspects of our business and.
And we found this format enables us to react and act proactively with unprecedented speed and efficiency.
I'm very pleased to announce the newly created significant leadership role for the company.
Juan Ignacio Abele effective September one Twentytwenty was named executive Vice President of digital experience and Chief Technology Officer.
Reports directly to me.
Juan it's been an entrepreneur in the technology sector for over 25 years working in diverse areas of information systems with companies such as Apple Intra America and now Seth.
One enjoyed pricing part as part of the Arab post acquisition that has since led a talented team that expedited the continued development of pricing like Dot com.
All right Omni channel efforts and along with other team members developed a crucial technology capabilities that make clicking go fully functional within weeks all drink cold good.
Once the expertise is an important component of our overall digital transformation process.
One is the distinctive features of our business is that we have a membership format and our membership data has value.
We now have a more user friendly infrastructure to make use of this data in real time to more efficiently operate all aspects of our business.
We're also developing technology that provides strong outbound and inbound communication with our members. So that we can better tailor sales and services for them.
The application of technology and enhancements of our systems and software allows ease of use and timely reporting so that we can make the optimal business decision.
On the last earnings call, we announced measures taken to preserve pricing rights cash liquidity due to the pandemics unknown impact.
One of those precautionary measures included temporary wage and salary reductions for those employees in our U.S. headquarters in Miami and San Diego.
Due to our strong fourth quarter results, we were able to pay a special bonuses senior vice president and below to offset the foregone wages for the month in which the reduction was taken.
The decision to restore employee wages is aligned with one of our core principles recognizing that our employees are our most important resource.
As to supply the team has done a tremendous job of securing alternative including quality local sourcing and distribution flow to minimize out of stocks on key items.
Due to pricing with long standing and strong relationships with our suppliers. We believe that we benefited from not trusted relationship and as a result, we were highly accommodative during the crisis.
This allowed us to continue to provide great values and merchandise to our members that abruptly came into high demand such as electronics computers garden, and patio home furnishing and entertainment and small appliances.
Do you discipline continued and fewer markdowns were taken in the fourth quarter.
Also we've increased our focus on inventory management and our average inventory per club declined in the fourth quarter by an average of approximately a million dollars versus the comparable prior year quarter.
In the fourth quarter and into the new fiscal years opening weeks. We are seeing continued improvements in the global parts of our supply chain as most of our suppliers are now operating at pre co good level.
However, there still are challenges our vendors and suppliers are facing that may limit access to certain categories, including cleaning supplies out.
Outdoor merchandised in electronics.
We're also monitoring very closely and taking appropriate actions to address ongoing disruptions to the flow container traffic from Asia.
We've developed alternative local sourcing options for quality products that meet the standards of our fixed right.
One example of this strategy during this last fiscal year was the opening of our second in country produce distribution center located in Costa Rica.
We expect to open additional Proteus distribution centers in other countries in fiscal 2021 week.
We believe that our farmers selection program reduces expenses waste and prices on higher quality item, while also supporting local farmers and industry.
Our prototype distribution centers also allow us to get high quality protein from farm to table quicker and more efficiently.
The properties D.C.'s have also allowed us to get high volume categories, such as fresh into the clubs faster with fewer out of stock.
Our 17 optical departments, while initially closed at the onset of cold, but are being reopened and we're on track for adding at least a dozen anymore in fiscal 2021.
The membership includes free there's an exam tractor or family members, an excellent prices on optical products.
With regard to demand it's important to note.
And although we may be considered an essential business.
Our markets generally do not provide the same latitude and predictability that essential business is in the United States enjoy.
We estimate that in the fourth quarter, we had approximately 260 clubs days lost in markets, where enclosed shopping was not permitted as a result of the varying limitations put in place to mitigate the spread of code at 19.
In addition to complete closure.
There were curfews and limitations on hours or the numbers of people permitted in club at any given time, depending on the market.
As a result, we saw a decrease in our in club throughput. However.
However, we also saw an increase in our average ticket, especially on quick and go transaction.
It should be noted that in clubs circulation and local restrictions have most significantly impacted our other businesses sales such as food services and optical that and those typically carry higher margins as well as our membership renewal rate and membership income.
Currently we are experiencing an easing of restrictions for example in September we only lost 30 club days and in October the closures have been declining.
Of course this can change at any time in any market.
During the last week of F. Y 2020, we launched our first membership appreciation week, which was very well received.
During this event, we partnered with our vendors to offer more compelling prices on certain items. We also invited existing and new members to sign up and order online and begin to familiarize themselves with our click and go service, while promoting our expanded offering of high quality high value private label member selection product.
Well I'd like to recap the recent achievements.
Online membership sign up and renewal is now fully functional.
Robust online platform for price Mark Dot Com, which includes the company wide catalog of inventory is available for our clubs.
We watched and completed the rollout of our click and go contact list service, which allows ordering online, including fresh and grocery.
With curbside pickup.
Although we're still in the early phases of this new program in our fourth quarter of fiscal year 2020, clicking go represented 3.6% if not merchandise sales.
Extension of our click and go service now includes delivery and nine markets and we expect the delivery service to be available in all markets by the end of fiscal year 2021.
Expansion of our farmer selection program and prototype distribution center expansion of our private label merchandise offering.
Our company wide cost, that's a digital transformation, which provides valuable tools for inbound and outbound channels to better align our business with our members' needs an expectation.
Excuse me a moment here.
We executed a safe and successful opening with remote oversight of our new clubs in the barrier Costa Rica, which has a significant ex Pat population and is our eight clubs in that country.
And we're preparing for the opening of our 47th club and second the Metropolitan area broker talk Colombia in early December which will be our eight clubs in Colombia.
We are also evaluating the construction of additional clubs, where we have already secured the property as we also look for additional locations.
We recently formalized a department of social and environmental responsibility and have kept an executive Vice President and Vice President just focus on our commitment to grow responsibly and evaluate our business decisions in the context of our impact on the environment and the communities in which we operate.
Finally, we're focused on cash management and liquidity at the beginning of the pandemic, we took appropriate steps to conserve cash due to the uncertainty created from the outbreak of COVID-19, we continue to closely monitor our operating results and cash flow to ensure optimal timing of future investments in warehouse club openings.
With regard to liquidity management, Michael will cover that in just a few minutes.
So now I'd like to turn to our business results for fiscal fourth quarter total revenues for the quarter were $810.6 million, an increase of 1.2% over the comparable prior year period net.
Merchandise sales were $772.9 million, an increase of 8.5% over the prior year period.
Currency fluctuations in our markets had a $27.6 million or 360 basis point negative impact on our net merchandise sales for the quarter.
By segment in Central America, where we had 26 clubs at quarter end, including four clubs opened since May 2019, net merchandise sales decreased 1.2% within 8.6% decrease in comparable in that merchandise sales.
Our comparable net merchandise sales were negatively impacted by significant traffic reduction and additionally, as expected we have seen sales transfer from our existing warehouse clubs to our recently opened warehouse clubs, which impacted comparable store sales growth.
In the Caribbean region, where we had 13 clubs at quarter end total net merchandise sales grew 6.8% with comparable in that merchandise sales growth of 6%.
Our Dominican Republic, Barbados in Jamaica markets led the way in the segment was 22.1%.
8.9% and 6.6% growth respectively.
And the D.R.R. net merchandise sales growth was primarily attributable to the opening of our kids club in June 2019, and strong comparable sales growth.
Our betas in Jamaica comps strongly for the quarter with the same number of clubs as last year. It.
It should be noted that in Trinidad those sales are very strong we are experiencing challenges in converting P.T.U.S. dollars and are exploring alternatives to mitigate the impact of a potential devaluation Michael will speak more to this later.
In Colombia, where we have seven club not merchandise sales decreased 6.6% for the quarter and there was a decrease in comparable net merchandise sales of 5.6%.
The impact of currency on total and comparable net merchandise sales in Colombia was significant at negative, 12.1% and 12.2% for the quarter respectively.
Currency devaluation continues to be a challenge in Colombia, but we are employing different approaches in an effort to mitigate the impact such as sourcing of locally produced goods.
Turning to merchandise, we continue to experience strong growth in our grocery and produce department it.
It is also important to note that during the fourth quarter of fiscal Twentytwenty and continuing into early fiscal 2021, we've seen a significant shift back to non food categories in some cases, even exceeding prior year prior year, Nick penetrations for those areas.
Also as local restrictions disease, we've seen a slow but steady increase in our other business categories, which include food service bakery and optical services.
Now I'd like to turn to membership.
Our total number of membership accounts at fiscal year end decreased 4.7% when compared to the prior year and period.
Our trailing 12 month renewal rate was 80.5% and 85.7% for the period ended August 30, 2020, and August 31 2019, respectively.
We believe this is because.
Historically members would renew their memberships at the register and due to the pandemic traffic has slowed down so the opportunity to renew at the registers decreased.
Colombia had the largest membership decline followed by Central America, and the Caribbean to date, Colombia Central America has been the hardest hit regions in terms of the severity and duration of the government imposed restrictions.
However, due to the notable increase in online traffic the new visibility of inventory online the opportunity to shop through our click and go program and the added convenience membership sign ups and renewals completed online has been steadily increasing and we are seeing very encouraging signs of membership renewal through this channel.
And now in clubs as restrictions ease.
Membership income income decreased 2.2% during the quarter, but increased 4.5% over the full fiscal year we.
We continue to expand our platinum membership program and we are seeing positive results.
Net income for the fourth quarter of fiscal year, 2020 was $20.1 million or 65 cents per diluted share compared to $20.7 million or 67 cents per diluted share in the comparable period last year.
As a reminder, we ended this quarter with 46 warehouse clubs compared to 43 clubs at the end of the fourth quarter of fiscal year 2019.
The new club income.
Include one in Panama, one in Guatemala, one in Costa Rica.
And that and as mentioned earlier, our 47 clubs expected to open in Bogota, Colombia in December 2020.
We had strong performance for the full year of fiscal 2020, considering the challenges we face.
Total revenues increased by 3.3%.
Net merchandise sales increased by 3.2%.
Comparable net merchandise sales decreased by 1.5%.
FX fluctuations adversely impacted net merchandise sales and comparable net merchandise sales by 2.1% and 1.9% respectively.
Net income for fiscal year, 2020 grew to $78.1 million or $2.55 per share compared to $73.2 million or $2.40 per share in fiscal year 2019.
Now turning to September sales and looking forward to ask why 2021.
We released those sales earlier this month that merchandise sales were $258.1 million, an increase of 4.6% versus the year ago FX fluctuations adversely impacted net merchandise sales by 3.5%.
For the four weeks ended September 27, 2020 comparable net merchandise sales increased 8.3% with a negative FX impact of 3.5%.
We were very pleased to see this positive U.S. dollar comparable sales increase for the first time since March of 2020.
Easing of restrictions and numbers of days closed appear to directly correlate with our ability to increase included in club Tropic and the corresponding positive impact on sales and membership.
Looking ahead to the upcoming holiday shopping season due to the unpredictability of the impacts from the cobot pandemic. We initially pulled back on long lead time merchandise orders for some of our more traditional seasonal program. However, based on evolving member demand the ability for us to better analyze extensive data in the quick an.
Mary efforts of our team, we expect a successful holiday season with an exciting collection of curated merchandise.
In closing we met this past fiscal year with courage focus and relentless work, we never lost sight of our priorities, which are informed by our values first taking care of our employees and focusing on the well being of our members.
We will continue to maintain our flexibility on how we operate our daily business as well as moving forward with our future investments, particularly related to omni channel.
The results, we're experiencing today would not have been possible without our front line employees commitment as well as our dedicated employees in our distribution centers and throughout our corporate offices. This.
This new fiscal year that started on September 1st will no doubt continue to have a new set of challenges, but we believe that our team is well positioned to turn those challenges into opportunities to drive growth.
Thank you and I will now turn the call over to Michael.
Thank you Shirley good morning, or afternoon to everyone and thanks for joining us today.
Sure has already covered many of the financial highlights for the last quarter, but I would like to add some additional commentary on a few specific areas.
Despite all the challenges during the quarter of operating through the pandemic told.
Although gross margin on that merchandise sales came in at 15.1%, which was within 10 basis points over the same quarter last year.
The 10 basis point decline was driven by a 70 basis point shortfall in our other business Department, which consist primarily of foodservice bakery and optical and typically have higher margins together with loss demo sampling income, but were all impacted by covered restrictions it.
It is important to note that while our other business departments improved marginally in the fourth quarter versus the third quarter. We began seeing significant improvement in these areas in the first quarter of fiscal 2021 as cold weather related restrictions have come to the east.
This Q4 margin shortfall was partially offset by a 60 basis point contribution from pure markdowns additional local merchandise volume rebates and improvements in our base margins.
Total revenue margins remained flat at 17.2% of total revenues in both the current quarter and the comparable quarter of fiscal year 2019, as the decrease in total gross margins on that merchandise sales was offset by an improvement in airports margins from a combination of increased sales volume and margin rate.
<unk> expenses for the quarter were 13.7% of total revenues, an increase of 50 basis points versus the same period last year.
The primary drivers of the increase where our continued investments in talent and omni channel initiatives. We also incurred $1.2 million of severance costs in the fourth quarter, primarily related to structural realignment of certain corporate functions.
Operating income was $29 million or 3.6% of total revenue in the fourth quarter fiscal 2020 compared to $32 million or 4% of total revenue for the same period last year, what's the decrease being primarily attributable to increased DNA expenses.
Net interest expense increased $1.5 million for the fourth quarter, primarily due to higher average long.
Long term loan balance was the former capital projects and higher average balances on our short term lines of credit as part of our COVID-19 related efforts to secure cash.
Our effective tax rate for the fourth quarter of fiscal 2020 was 28.2% versus a rate of 34.1% a year ago.
The decrease in the effective tax rate during the quarter is primarily due to the fact that Q4 pre tax results were stronger than expected at the end of Q3, which reduced the quarterly impact of the valuation allowance for U.S. foreign tax credits during Q4.
For the full fiscal year, the effective tax rate was 32.5% versus 33.8% for the previous fiscal year.
For fiscal 2020, and fiscal 2019 were favorably impacted by the verse reversal of previously recorded liabilities for uncertain tax positions.
Following the expiration of the respective statutes of limitations.
Due to the potential variability of quarterly effective tax rates because its just excuse me because of specific events in each quarter. We believe before your rate is more indicative of our trends based.
Based on our current trends and poor customer result, we anticipate our full year fiscal 2021 effective tax rate to be approximately 35%.
All in all diluted earnings per share came in at 65 cents from the fourth quarter versus 67 cents in the same quarter of last year.
Maria [noise] moving on our balance sheet remains very strong we ended the quarter with a strong position with cash cash equivalents unrestricted cash totaling $303.8 million, an increase of $197.5 million versus the same period a year ago.
Cash provided by operating activities increased $89 billion versus the same period last year, primarily due to focus merchandising strategies and inventory management, along with the extension of vendor terms, primarily on our merchandise payables.
It is important to note that many of the extended winter vendor terms began to revert back to pre covert terms in the first quarter of fiscal 2021.
And many more extended vendor terms are currently scheduled to continue reverting back towards pre covered terms through the third quarter of fiscal 2021. However, we are taking advantage of lessons learned during the pandemic to revisit terms with major suppliers across our geographic location and product categories in order to make permanent where appropriate.
Extended payment terms, especially on our longer lead time merchandise.
Net cash used in investing activities increased by $6.5 million, primarily due to the increasing investments in certificates of deposit have trended up dollars we have on hand.
The increase in certificates of deposit were offset by fewer capital expenditures.
Although turn it out as a market that has performed very well in the current year with mid single digit comparable net merchandise sales growth. We continue to experience a very liquid market with respect to sourcing U.S. dollars. Another tradable currency is in Canada.
As a result as of August 31st 2020, our Trinidad subsidiary has <unk> dollar denominated cash cash equivalents and short and long term investments measured in us dollars of approximately 79.6 million.
In August the liquidity situation began deteriorating further and as a result of not being able to source enough U.S. dollars to pay for our imports into Trinidad. We recently began to restrict shipments into this country in line with your mouth of U.S. dollars, we were able to source.
This situation is dynamic and we are making all reasonable efforts to source tradable currencies with our banks as well as taking actions to convert to locally sourced products, where feasible and looking for alternatives to export merchandise from Trinidad to generate more tradable currency.
If this situation does not improve rapidly it is likely that sales and our profitability and turned out will be negatively impacted lessens our fiscal second quarter.
Returning to our cash flow activities to $107.6 million increase in cash provided by financing activities is primarily the result of the net increase of proceeds from long term borrowings of $55.7 million.
Compared to a year ago to finance, our warehouse club construction projects and up $50.6 million increase in cash provided by short term borrowings, which we access as a precautionary measure at the beginning of the COVID-19 pandemic.
As conditions evolve during fiscal 2021, we continue to monitor our cash position look closely however, based on current trends and forecast. We currently expect a fully paid down these lines of credit by the end of our fiscal third quarter.
Despite the challenges we faced during the second half of the fiscal year. We believe that we are emerging as a stronger company. We will continue to focus on the sports rights of merchandising with the goal of driving same store sales continuing to expand our quick can go service and developing and growing our digitally enabled omni channel platform.
Our balance sheet liquidity and cash flow remains strong which provides a solid foundation for driving same store sales and future growth and we believe will benefit our members and stockholders alike. Thank.
Thank you all for your support during these times of uncertainty.
We believe we are on the right path for continued success.
I will now turn the call over to the operator to take your questions. Operator, you may now start taking our callers questions.
Thank you.
We will now begin the question and answer session to ask a question you May press, so far and then one on your Touchtone Fad.
If you are using a speakerphone.
Please pick up your handset before pressing the keys.
And so it was probably your question. Please press Star then two at this time, we will pause for a moment to assemble roster.
Our first question today will come from Jon Braatz of Kansas City Capital. Please go ahead [noise] weren't sure Mike.
Good morning Arnie.
Morning.
Sure.
What are your thoughts on opening new stores.
Additional stores beyond Bogota, and 2021, I know you had some plans and obviously, there's still some uncertainty, but they seem to be easing a little bit.
Do you think we'll see some some additional stores in 21 2021.
I can't give you a definitive answer at this point other than the fact that were you know we we already have.
Three locations that we secured the property and we are a in a good position to move on then depending on the totality of the circumstances really what's happening is that the unpredictability in volatility of of the pandemic does.
Influence, our thinking on and on an ongoing basis. So I don't want to go out on a limit the point, but I can tell you that we're well positioned to be able to move quickly on additional clubs in a moment, we decide it's the right time.
Are they are they the.
Full size stores the.
The three locations.
It's a mix okay. Okay. Okay.
Right.
Michael you mentioned that in the fourth quarter, the yesterday costs or <unk>, I think you said $1.2 million and severance costs.
But sure you mentioned that there were also you also paid some some onetime bonuses or sort of recaptured what are repaid what what was forgiven than in the first two quarters first three quarters, what was that sort of.
Net impact of all that on on on your roster unit costs in the fourth quarter.
So John it's kind of a wash, it's kind of a wash <unk>. It was the waiver was from May through May onest through the end of July actually you only got one month in Q3 and two months from Q4, and then we just did a catch up payment in.
In Q4, so two it's really comes to wash for okay for the quarter, but the but there was an impact on the the catch up was was in the fourth quarter.
Right of which two thirds would've been in the fourth quarter anyway. So it really gets lost them around it okay and what was the what was the 1.2 million and severance costs.
Just no departure.
Executives and also there were some furloughed employees, who did not return and that was as a.
Part of our.
Processing sort of pre.
Reforming the the appropriate staffing to meet the needs that a the company required at the time, okay, Okay, and and I'm sure you mentioned that the Aero post margins were better in the quarter.
Compared to where they have been oh, what's behind that ball.
Volume by volume, Okay Yep.
Yep.
All right is that the traditional volume that Aeropostale <unk> was doing.
I don't have in front of me historically, but I can tell you is that the.
The demand for online as we saw it has increased everywhere as a result of the pandemic. Okay. So I do believe that those people that were in a position to be able to acquire things or purchase things through arrow poached and import them into a in country took advantage of that.
Channel and so there was there was a a big surge in activity there. Okay. One last question Michael.
Michael I'm sure.
You've got a lot of cash on the balance sheet and and Michael you mentioned that you know the vendor terms will be changing and and and so on and that might either eat a little bit in the cash, but still have a lot of cash what.
What are your intentions would that cash [laughter].
Well, John I think I think I mentioned also that we haven't quite a bit of lines of credit that were drawn down on so between the two between the lines of credits and the vendor terms, there's something to revert to a pre covert terms, we hopefully won't but what I would I will take a big chunk out of that cash, but obviously you know it certainly.
Feel comfortable having that cash you know.
During these challenging times and obviously you know Sharon mentioned before we've got three properties that we have already closed bond and we hope to build on them, obviously looking aggressively.
The other options in other countries, so ideally we'd like to redeploy it okay Oh internally.
Yeah, Yeah, Okay, alright, thank you very much.
And our next question today will come from Rodrigo <unk> from Scotia Bank. Please go ahead.
Hi, everyone.
Good morning from from my end good morning, sorry, I'm on the one hand I'd love to hear your thoughts on the lead we try to yes, you rolled out that out I mean are you is that being done in house are you relying on third party Aggregators <unk>, how does that work into different markets and I guess related to to digest.
Choose us to.
How each market is behaving differently on the online Oh from which markets are you seeing the highest engagement and I guess related to that what do you see the biggest opportunity as you continue to roll out the lease and all that thank you.
Ah, Yes, you're welcome the delivery that's <unk> delivery solution in the last mile solution varies from market to market.
I mean as you know one of our strengths of the company is our ability to okay.
Taylor the appropriate solution for each of our markets given the fact that our markets have varying characteristics in some markets. There are third party delivery services, where it makes sense to contract with them.
And Submarkets, we actually are doing some of it ourselves in house.
And in some markets. It's it's true third parties that are purchasing price smart merchandise through their own platform.
So or it's a combination of those things.
And I can tell you generally as to your second question that there's been a.
Strong adoption in Central America.
The delivery at Columbia, as well as the Caribbean I believe lags a bit.
And it may have something to do with the.
I do think there's there's a relationship with <unk>, how those markets and how the governments are reacting to the threat of the pandemic.
And I'm also I also believe that it has somewhat to do with timing because as you know we roll these markets out sequentially. We didn't open up quick and go all at once.
And the Caribbean with one of the later.
A area that we we rolled out clicking go.
And by the way if I earlier said about delivery.
Speaking more generally about click and go over all in terms of the adoption.
Which which would include the curbside contact was pick up.
Got it and I guess, we you know our geos for the nearly.
Nearly 300 days, so disruption from some restrictions.
From and we also adjust for FX.
It sounds like sales would be.
Doing well that does that.
How you look at it as well or do you see something else.
Besides that.
We feel good about what we put out in September I'll tell you I'm a [laughter].
Right.
Yeah I mean.
There's there's no question again I can't emphasize this enough.
You look at.
Similar businesses in the United States that are considered essential businesses.
And <unk> and <unk>.
Generally speaking they do not experience the same type of challenges that we do in our markets, which are more vulnerable markets and and they don't have.
In those markets most of the markets. We operate in did not have stimulus packages like we have in the United States, where people had additional funds that they were able to then go spend on essential items. So you know the markets that we are in tend to be a more vulnerable.
And different governments respond differently to that some are extremely conservative and shut things down some basically continue as though business you know there's no. There's nothing going on we have to be quick and nimble and adapt and figure out the best way. The bottom line is we need to earn in May.
Maintain the trust of our members and that's how we're going to continue to grow sales.
Is that when they know that Theres big shopping with us whether it's in club or its through delivery or clicking go and that we're taking every precaution that we can reasonably think of I believe that where we are going to continue to be the trusted leader in our markets because that's what our members.
There are needing and looking for right now.
Got it but that's clear and just one final question from my end.
So like the the local sourcing a would you you know has been highlighted <unk> for a few quarters now, but it sounds like this is becoming.
Potentially yes you.
You know structural mid term or long term shift, but clearly sounds like it's becoming a bigger and bigger opportunities for you there.
They wouldn't quantify that you can share in terms of where you are in that evolution and if I'm looking at is this the right way in terms of you know a pretty big opportunity.
Well, we certainly see it as a as a great opportunity, but it's one that we only take when we truly believe that we are able to source those products in a manner that aligned with the six rights and meets our high standards, especially for.
Our private label.
That the product has to be as good if not better than the leading branded product and yes. Indeed, there are opportunities to especially for example in Colombia that that has a more mature market an industry in certain areas.
Manufacturing and produce and other areas as well and there's several advantages.
In terms of lead time in terms of reduction of supply chain disruption threats.
In terms of cost in terms of natural hedging and so we are carefully studying that area to see where those opportunities exist without compromising the uniqueness of our product offering as a company and the fact that we provide curated merchandise.
That comes from Blake.
Places that are not readily accessible to our members in those markets. So it's a balance.
And and there are some areas, where it makes sense for us to do it and there's other areas, where you know we we stick to the core providing you know the U.S. membership style club experience with a wow items, but we certainly are seeing great opportunities with with local sourcing as well.
[music].
Got it very very clear. Thank you Sheri. Thank you Michael.
You're welcome have a good day, thank you Rodrigo.
Ladies and gentlemen, this will conclude our question and answer session and at this time also conclude Pricesmart incorporated fourth quarter 2020 earnings Conference call. We thank you for attending today's presentation and you may now disconnect your line.
Thanks.
Thank you.