Q4 2021 PriceSmart Inc Earnings Call
Good day, everyone and welcome to price Smart incorporated earnings release conference call for the fourth quarter of fiscal year 2021, which ended on August 31st 2021 factor.
After remarks from our company Representatives Sherry bear in Baby, Chief Executive Officer and Michael.
Mccleary, Chief Financial Officer, who 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 22nd 2021.
A digital replay will be available following the conclusion of todays call through October 29 2020.
By Dialling 187734475 to nine for domestic callers or 141 to 3170088 for international callers and by entering the replay access code one.
101599 to five.
For opening remarks, I would like to turn the call over to price Smart Chief Financial Officer, Michael Mccleary. Please proceed sir.
Thank you and welcome to the price Mart earnings call for the fourth quarter of fiscal year 2021, we.
We won't be disk.
One the information that we provided in our earnings press release, and our 10-K, which were both released yesterday afternoon October 21 2021.
You can find these documents on our Investor Relations website at investors stock price Mart Dot Com, where you can also sign up for email alerts.
As a reminder, all statements made on.
St Prince call other than statements of historical fact are forward looking statements concerning the company's anticipated plan.
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Forward looking statements include but are not limited to statements containing the words expect believe will may should estimate and similar expressions.
All forward looking.
On this costs are based on current expectations and assumptions as of today October 22nd 2021.
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, and other filings with the SEC, which are accessible on the SEC's.
Steve on site at Www Dot FCC Dot Gov.
These risks may be updated from time to time the company undertakes no obligation to update forward looking statements made during this call.
Now I will turn the call over to Sherry bearing begging price Martin Chief Executive Officer.
Jerry you're on mute I think.
Pardon me.
Thank you Michael a good day, everyone. Thank you for joining us and for your interest in price smart.
Fiscal 2021 was quite a year our team of more than 10000 dedicated employees really excelled by working together.
He sees one chain to innovate and respond to the fluid circumstance here.
We continue to experience throughout the 13 markets in which we operate.
Driven by this commitment and hard work. We're pleased to report strong results for our fourth quarter of the fiscal year, and we continue to see growth in sales and membership.
Once we begin the first quarter of the new fiscal year.
Despite ongoing COVID-19 related restrictions in some form that is affected most of all of our clubs.
The fourth quarter of fiscal 2021, net merchandise sales grew 12, 7% and comparable net merchandise sales grew 10.
8% compared to the same quarter last year.
Our membership has grown to an all time high and our 12 month trailing renewal rate is the highest its ever been since we began recording it 14 years ago.
These fourth quarter results were achieved through improved operational efficiencies.
Three new digital capabilities Optionality for our inventory flow our E Commerce platform price Mart Dot com data analytics incremental member benefits and services alternative sourcing of goods in response to global supply chain disruption.
Expansion of our private label program.
And most importantly, the resilience of our dedicated team it has become quite adept at adjusting the rapidly changing dynamics brought on by the pandemic and its varying impacts on our markets.
We continue to evolve into a more data driven organization.
Our membership model in and of itself different.
Program takes us from other retailers and provides a competitive advantage because it provides a wealth of data that allows us to better serve the needs of our members.
Knowledge is power and we are gaining valuable insights through the new analytics that allow us to use membership data effectively to improve member satisfaction and ultimately contribute.
The higher membership renewal rate.
We also believe that the early and comprehensive measures, we've taken to protect and prioritize the well being and safety of our employees and members has further strengthened our standing in our market.
Additionally, we believe that our adherence to the fundamentals of heart isn't.
Isn't it.
Stripes of merchandising, which I've discussed on prior calls has also contributed to positive results.
For example.
Even when comparing our performance to the pre pandemic period in FY 2019 warehouse productivity has increased and inventory management we've reduced.
Sit down salvage throw away into merits.
These key metrics have improved relative to the comparable time in 2019. Despite the challenges we continue to experience as a result of the pandemic.
We believe our value proposition is really resonating with our members.
I'm excited to report that our total.
Mark number of membership accounts reached an all time high of 1.67 million accounts as of August 31, 2021, even after we experienced the COVID-19 related dip at the end of fiscal 2020.
That's a seven 2% increase when compared to the comparable prior.
Total net period.
Our trailing 12 month renewal rate was 89, 6% for the period ended August 31, 2021 up from 85% for the period ending August 31, 2020 and upfront.
85, 7% for the period ending.
Europe 31 2019.
The 12 month renewal rate of 89.6% is the highest since we've been publicly reporting this data and has increased 200 basis points from the end of the third quarter of fiscal 2021.
This shows our business model is a real winter in our markets.
Our membership model is a key differentiator from our competitors and an important asset.
Our investments in technology, and new talent to provide valuable data analytics tool.
Valuable data analytics.
Which by the way our expense.
Are helping us unlock greater value from our membership day.
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This provides us with the opportunity to provide better customer service and more quickly gain better insight into trends and preferences.
It also enhances predictability, which is a great benefit to any business, especially in a rapidly evolving environment, whether it be the pandemic global supply chain disruption.
Data.
Cultural shift of consumer behavior in the age of E Commerce.
Early indications are showing that so far members, who engage with us online and in club members, who we consider to be true omnichannel members tend to spend more with us than those who only engage with us in.
Club. Additionally.
Additionally to date, we're seeing that price smart dotcom transactions generally yield a higher spend per transaction than our average in club transactions.
During Q4 price Mart Dot com with the law.
Our members to purchase online for curbside pickup.
Our delivery through click and go.
That represented 3.5% of our net merchandise sales.
Click and go is currently available in all 47 of our clubs.
Our delivery service is growing as a larger proportion of our price smart dot com sale.
Our experience with click.
Click and go and it's demonstrated that demand for the service and the data generate generated by price Mark Dot Com and online channels is another way technology has enabled us to enhance the value of the membership.
We believe price might dotcom is providing us the platform for significant sustainable growth for our business.
And it's valuable incremental benefits to our members.
Yeah.
We're also pleased to see members using price smart dotcom to sign up and remove their membership.
Online member sign ups and renewals, which we referred to as digital membership provides several advantages to us including the opportunity for auto renew.
Renewal and auto payment, which helps to sustain our renewal rates.
Digital membership also provide a more direct way of communicating with members and learning about their preferences are.
Our focus on converting our members' digital sign ups and renewals have helped us increase digital sign up from 6% of all.
New sign ups in fiscal 2020% to 16% in fiscal 2021.
Another encouraging sign that our membership model resonates with members is the growth of our platinum program.
Which offers annual rebates to members in exchange for a higher annual membership fee of approximately $75.
Compared to approximately $35 for a diamond membership.
Analytics, and new communication channels with digital members.
Helped us better demonstrate the value of this program to our members.
Accounts in total have grown by 28% since the end of fiscal year 2020 and by.
73% since the end of fiscal year 2019.
Platinum accounts now represent 7% of our total member account base as of the end of fiscal year 2021.
The advantage of platinum members as they tend to show more loyalty and predictability as they renew their membership at higher.
Right and have higher average spend than our diamond members.
We finished rolling out the platinum program to all of our markets during the past fiscal year of 2021.
Our commitment to the development of technology and analytics is reflected throughout the company, including the leadership.
Ship team.
Accordingly, I'm very pleased to announce that effective September one 2021, Nicholas mobile I'll speak was promoted to a newly created position for the company Executive Vice President member experience and strategic analytics prior.
Prior to his promotion Mr. Myself. He served as senior Vice President of price Smart member experience.
Parents.
Joining Christ smart he's expanded the capabilities of our leadership team made great strides in helping us better understand members.
And he along with his team have devised strategies to grow sales by extracting valuable insights.
In addition.
Mr. Matt.
He and his team have shown how the infusion of user friendly data and report positively impact business decision, making throughout the company.
Now, let's turn to sales by segment during the fourth quarter, we delivered significant sales growth in Central America versus the same period last year.
All markets within this segment produced positive sales growth for both the quarter and the full fiscal year Center.
Central America posted 18.9% sales growth in the fourth quarter compared to the prior year period.
In Guatemala, we are looking forward to opening our fifth club next week and that club is known.
One is around that.
During the quarter. Despite the strong performance of five clubs in the Dominican Republic, we saw a decrease in net merchandise sales in our Caribbean region.
This was primarily driven by Trinidad where we have four clubs and where they have been experiencing experiencing a high level of COVID-19 infections.
Factions and related restrictions.
In the second half of the fiscal year 2021 the.
The government of Trinidad responded with strict lockdowns and significant restrictions that resulted in complete closures for few weeks followed by a reduction of our club capacity and our sales being limited to one.
Only groceries and essential goods.
This coupled with our decision earlier in the year to limit U S imports to trend it out because of the ongoing challenges converting.
Currency led to a significant decline in net merchandise sales in Trinidad for the quarter.
Columbia delivered an impressive 21 seven.
7% sales growth for the quarter, despite a negative FX impact.
And next month, we will be opening a manga or nightclub in this market.
In terms of merchandise, we saw our non foods category comprised of both hard lines soft lines continued its impressive run with 16, 3%.
Sales growth compared to the same quarter in the prior year.
Our merchandising team has done a great job of anticipating demand and working with our global suppliers to procure high demand inventory that has been difficult for our competitors to secure.
As a result, our soft line category grew approximately 40%.
Casual apparel grew 41% and basic apparel grew 48% versus the same quarter last year.
We're seeing the shift in consumer behavior from the stockpiling in search demands for essentials in the second half of fiscal year 2022, and increased demand for discretionary items that is continuing.
Continuing into this fiscal year.
Our hardline category experienced approximately 7% comparable sales growth compared to the prior year quarter.
Virtually all categories in that segment enjoyed growth, but the leaders worked garden patio, which grew 42%.
Sporting goods, which grew 29%.
<unk> and small appliance sales grew 19%.
Due to the Covid stock ups in the prior period as expected, we experienced comp declines year over year in our canned food grain and grocery categories, which were largely offset by a rebound in other categories, such as soda and beverages pet supplies and oils.
And economists.
Overall, our food category remained steady and had a nearly 6% gain in the quarter.
Our fresh category grew nearly 11% this quarter versus Q4 of last year with poultry growing 26%, we were up 23% and gourmet foods were up 12%.
We're seeing growth in our high quality fresh products sourced through our direct farm program. Our direct farm program to remind you reduces costs and improves the quality of our fresh produce offerings, while also supporting local farmers and the industry in our markets.
Our new produce distribution centers allow us to provide farm to table produce more cost effective.
Secondly, allowing us to pass on a better value than if we were to purchase from distributors.
We currently have to produce distribution centers in operation located in Panama and Costa Rica.
We expect our third party distribution center in the Dominican Republic to be fully operational by the end of the current quarter, we intend to continue.
To expand this program with additional produce distribution centers and more of our markets going forward we.
We especially like this program because it is a win win win for our business our members and our local communities. It also furthers our mission to be a socially responsible business.
A significant component of our merchandising.
Dyson strategy in another way, we build brand loyalty and differentiate ourselves from our competitors is through our private label products are.
Our private label products only.
Earned a private label if we believe the product is it the same or better quality as the leading brand and can be offered for a better price.
We've increased our selection in all major areas versus the prior year.
Our private label sales as a proportion of our total net merchandise sales for the 12 months ended August 31, 2021 with 22%.
This is going to be an important part of our merchandising strategy as we move forward.
Beyond the obvious benefits of quality value and price private label gives us greater opportunity to near shore, the sourcing and manufacturing on select items.
Gives us the opportunity to invest in local markets. It helps potentially reduce the risk of supply chain disruption.
And.
I got a high potential opportunities for vertical integration.
Our other business category yielded 41% comparable net sales growth led by our food court, which grew by 46% and bakery, which grew 31% for the quarter versus the prior year.
We achieved these growth.
Despite the fact that Trinidad food courts were closed most of the quarter and were restricted to take out.
For the rest of the quarter. Additionally.
Additionally, a few other markets also have some club closure days that negatively impacted sales in this category.
Turning to supply chain and inventory.
Like many other businesses across the globe, we experienced several challenges during the quarter, including container shortages port delays and truck and driver shortages.
These disruptions and shortages are impacting the timing of deliveries and leading to higher freight transportation and labor costs.
Despite all of these issues we worked hard.
Hold down in or mitigate the price increase was passed on to the members while maintaining sufficient inventory.
Our expanded network of distribution centers and additional real time data on a number of fronts.
Fulfillment heated alternative booths of shipments increased throughput and provided flexibility all of which helped us keep.
In stocks and generate the sales for this quarter.
We've also made strategic investments in inventory and worked with our local vendors to source alternative products to reduce potential future out of docs on high demand items that have been impacted by these disruptions or that have been affected by electronic part shortages.
Good in the last several months, we've also experienced inflation because of significant increases in the prices of commodities that are input to our vendor's product.
Despite these issues our team has done a great job of holding delaying or mitigating cost increases and their continued efforts to provide the best value to our members.
For supply chain disruptions and overall inflationary impact of sourcing and shipping merchandise are causing pressure on our ability to consistently source merchandise and will likely further impact our costs and the price of merchandize.
We are closely monitoring our inventory and supply levels.
To provide the best possible value.
However, in this inflationary environment, while mitigating against the risk of decline in demand.
Now looking at real estate.
We're excited about our plans to open our 48 club and argon dye Guatemala next week, which will be our fifth club in Guatemala. We're also.
We also expect to open a new smaller format.
<unk> club and Bucaramanga, Colombia next month, which will be our ninth club in Colombia.
Our technology and Omnichannel capabilities and enhance the value of our smaller format club concept by allowing us to extend our reach and presence in regional or secondary city locations and represents a significant opportunity.
Weyerhaeuser growth for the company.
Following bucaramanga. The next planned opening will be in court more Jamaica, which is currently scheduled to open in spring of 2022 this fiscal year.
We have expanded our real estate team and have an active pipeline of additional potential club locations.
D that we're working on and many of our markets, which we will announce the level of certainty around the timing of each project solidified.
We will evaluate the locations sizes and investments required for these additional clubs in the context of the opportunities. We now see the capture sales through the combination of our.
Our brick and mortar clubs are priced smart dotcom platform enhance delivery capabilities and potentially less costly strategically located fulfillment and delivery hubs, which we are studying now.
Our member wellness initiatives remain a key focus of our growth strategy.
As.
Patient August 31, 2021, we had 38 and club optical centers in nine of our markets.
Plan to expand this service to almost all clubs by the end of fiscal 2022.
As of the end of fiscal 2021, we had opened our pharmacies.
Pharmacies in three of our clubs in Costa Rica, and we expect to open pharmacies in the.
As about five Costa Rica club during the current quarter.
Followed by other kind of other countries that we are.
Planning for pharmacies as well.
We recently opened our first two audio service centers and Guatemala under our well remember wellness umbrella and we'll be opening our new club in that Rhonda with.
Remaining allergy and optical services included.
We plan a full rollout of audiology to all clubs and Guatemala during this quarter.
Initial indications initial indications from our audiology department or that our members are enjoying dramatic savings relative to the lowest priced competitors in <unk>.
Dishing to improving their quality of life.
In recognition of all the hard work determination flexibility and commitment to the company. During this pandemic, we paid all of our Nonmanagement employees, a special appreciation bonus which in some markets has a component that incentivize our employees to.
Audio vaccinated.
The total impact to the fourth quarter was approximately $1 $9 million.
Price Smart people first culture as embodied at every level of the organization and it is humbling to see the tireless effort made by our employees to support the members' co workers and our.
Get bodies and ensure business continuation throughout all of these significant challenges that had been brought on by the Covid pandemic.
To bring you current following the fourth quarter, we sold the legacy Aero post Hospira and marketplace operations.
The talent technology and processes, we gained when we.
Community are pushed in 2018 served as a springboard to launch our E Commerce platform price Mart Dot com.
Accelerated online sales for curbside pickup and delivery and are generated online member sign ups renewals and payments and enhances our ability to better connect and serve with our.
We acquired our members.
We've retained the requisite valuable talent and the technology that is directly applicable priced smart plans for the future growth of our Omnichannel business data analytics and information technology capabilities.
Meanwhile, recouped a portion of our original investment in Aero Club.
Sort of dispensing of parts of the business that we believe are not core to play smart growth plans.
Examples of the talent. We have retained include our recently created EVP position of Chief Technology Officer, and he was EVP position of member experience and strategic analytics.
These key leadership roles have been filled by former Errol close to officers and continue to be supported by members of their team.
We believe the transaction itself will not have a material impact on our results of operations in fiscal year 'twenty, two but will consolidate our efforts sharpen our focus and will help accelerate our.
Well it shouldn't going forward by freeing up resources that were previously shared with the Arab post legacy businesses.
We finished the fiscal year with a strong fourth quarter, especially as we saw membership rebound on and foot traffic to our clubs increased in most markets.
When looking to the future including.
In English term, we've embarked on a multi year growth plan, which includes building the internal infrastructure needed to support faster growth.
These initiatives will be buoyed by further investing in talent and technology much of which is expense.
We plan to grow by expanding our brick and mortar footprint.
The large e-commerce platform.
Both of these sales platforms with a diversified and expanded logistics and distribution system.
We intend to continue our increased focus on our private label product offering and identify additional opportunities for vertical integration.
We will evaluate every element of our growth.
And our through the lens of the member and we will drive this growth by continually increasing the value proposition, we represent to our members and by growing our member base.
To wrap it up we're grateful for the trust that our members have placed in us to help improve their lives and businesses, especially during these trying times.
And I'm, especially proud.
Those are more than 10000 employees across 13 countries. It.
It has taken everyone's collective effort from frontline workers to remote and oxide workers from club and country managers to corporate executives.
And our supportive board of directors, thanks to each and every one of you together.
Proud I think trials into trials.
Our team is energized and motive motivated to grow.
And we believe that the investments that we're making to lay the foundation and infrastructure or near and medium term growth will help us gain market share.
I want to thank you all for your time today.
Turn now turn the call over to Michael.
Thank you Sherry good morning, or afternoon to everyone and thanks for joining us today.
Total revenues in net merchandise sales for the quarter were $909 $6 million.
$871 $2 million respectively.
Presenting increases of 12, 2%.
And all 7% over the comparable prior year period, respectively.
Including the club we opened in Bogota, Colombia in December 2020, we ended this quarter with 47 warehouse clubs compared to 46 warehouse clubs at the end of the fourth quarter.
2020.
Our comparable net merchandise sales growth was 10, 3%.
For the 13 weeks ended August 29 2021.
Foreign currency fluctuations had a negative impact on both merchandise sales and comparable net merchandise sales of approximately $10 million or 130 basis points and $9 million or 110 basis points respectively.
By segment.
Went from Central America, where we had 26 clubs at year end.
Quarter end excuse me net merchandise sales decreased 18, 9% with an 18, 7% increase in comparable net merchandise sales.
Most markets in this segment had double digit comparable net merchandise sales growth with only Costa Rica coming in strong but in single.
And.
And the Caribbean region, where we had 13 clubs at quarter end.
So net merchandise sales declined one 8% and comparable net merchandise sales declined two 2%.
The Dominican Republic continued its stellar sales performance during the COVID-19 pandemic with double digit sales growth although.
The change was more than offset by weakness from Trinidad where we have four clubs.
In Trinidad comparable net merchandise sales declined 21, 3% in the fourth quarter due to COVID-19 related restrictions and our continued reductions of U S inventory shipments to that market in response to the U S dollar illiquidity situation.
Of note for most of the.
Although this quarter, we were unable to sell an honest central merchandize from Trinidad.
Thus, we further reduced our shipments of U S inventory during that period, However, and did they got mid August. This prohibition was rescinded and we were allowed to resume sales of these items. Therefore, we began increasing our merchandise shipments to Trinidad and at the end of fiscal 2021.
Fourth gate in Colombia, where we had eight clubs opened during the quarter net merchandise sales increased 21, 7% and comparable net merchandise sales increased 3% the.
Comparable net merchandise sales increased contributed 30 basis points of positive impact to total comparable merchandise sales for the quarter.
Colombia is benefiting from a comparatively improved.
19 situation from a year ago and from the opening of the eight clubs in this market in December of 2020.
The impact of currency on total and comparable net merchandise sales in Colombia was negative two 6% and two 3% respectively for the quarter.
Currency fluctuations are a constant challenge in Colombia, and we continue to take.
Covid much to try to mitigate the impact of any future devaluation, such as the sourcing of locally produced goods and actively managing our sales prices and foreign currency exposure.
Turning to gross margins total gross margin on net merchandise sales came in at 15, 9%, an 80 basis point improvement over the same quarter last year.
80 basis points.
Actually this was primarily driven by approximately 60 basis points due to certain pricing actions, we took to offset foreign currency exchange costs and COVID-19 related operating costs and the remaining 20 basis points was primarily due to the effect of margin.
Turning on our other business categories, such as food services and optical comparatively.
<unk> interim periods.
Total revenue margins increased to 17, 7% of total revenues an increase of 50 basis points versus the same period last year.
This is the result of a higher gross margins of 80 basis points that I mentioned previously.
Partially offset by lower revenue margins from our costs are euro and marketplace.
Business in the quarter of 20 basis points, and 10 basis points and lower other revenue and income.
Selling general and administrative expenses for the quarter were 14, 1% of total revenues an increase of 40 basis points versus the same period last year and total SG&A expense increased $18 million compared to the prior year.
This club.
For your other operations expense contributed 30 basis points of the income.
Primarily due to our new club in Colombia, which has not yet reached normalized sales levels.
Administrative expenses contributed the other 10 basis points of the increase primarily due to investments to support our talent and technology development.
Operating income was 30.
$32 $5 million in the fourth quarter of fiscal 2021 compared to $29 million in the prior year or three 6% of total revenue in both Bruce.
Net interest expense decreased $1 $2 million for the fourth quarter, primarily due to a short term borrowing.
Third to sorry.
Primarily due to lower short term borrowing compared to the prior year period when we.
Drew down on short term lines of credit as part of our efforts to secure adequate cash to cover our contingencies arising from COVID-19 related risks, we repaid all of these borrowings by the end of the third quarter of fiscal 2021.
Other expenses up $1.5 million.
These were primarily related to the cost to convert Trinidad dollars into other tradable currencies.
However, these costs were partially offset by unrealized currency gains related to our U S. Dollar denominated cash position in Jamaica designated to fund the construction of our Newport more clubs due to a devaluation.
Our relation during the period of the Jamaican dollar against the U S dollar.
In the prior year, we recorded a net gain in this line of $1 million, primarily due to the devaluation of the Jamaican dollar on the Costa Rican clones against the U S dollar in that group.
Resulting in a.
Negative year on year pretax FX impact on earnings of $2.5 million.
Our effective tax rate.
For the fourth quarter of fiscal 2021 came in higher than last year at 35, 5% versus 22% a year ago, primarily related to recognition timing for the loss of the benefit of a foreign tax credits, which are no longer deemed recoverable.
It is important to remember that last year's Q4 effective tax rate was lower than normal due to a much stronger pretax results.
As expected as of the end of our third quarter last year.
Our full year effective tax rates were fairly consistent between years coming in at 33, 3% in fiscal 2021 versus 32, 5% in the prior year on a go forward basis, we continue to estimate an annualized effective tax rate of 33% to 34%.
Net income for the fourth quarter of fiscal 2021 was $19 $5 million or <unk> 63 per diluted share compared to $20 1 million or <unk> 65 per diluted share in the comparable prior year period.
Now I would like to cover just a few brief highlights related to the full fiscal year and our strong balance sheet.
In fiscal 2000.
21, total revenues increased by eight 7% net merchandise sales increased by eight 6% and comparable net merchandise sales increased by five 8%.
Tax fluctuations adversely impacted net merchandise sales and comparable net merchandise sales by two 4% and two 3% respectively.
Net income for fiscal year 2020.
'twenty, one grew to $98 million.
Or $3 18 per share compared to $78 1 million or $2 55 per share in fiscal year 2020.
Moving onto the balance sheet, we ended the quarter with cash cash equivalents and restricted cash totaling $215 $5 million.
While cash flow provided.
By operating activities decreased to $132 1 million versus the prior year period. This decrease was primarily the result of the vastly different inventory financing strategies throughout the different stages of the pandemic between these two years and.
In the prior year period, we made a conscious decision to pull back on merchandise levels in non food areas, whereas in the.
Current period, we increased our position in these items to meet increased demand and to compensate for supply chain challenges.
Additionally, at the beginning of the pandemic when negotiating temporary extensions with vendor terms to assist and cash management activity. These temporary extensions have now elapsed. However, we have been able to secure permanent extended terms with.
A substantial portion of our vendors, especially for long lead time items.
Net cash used in investing activities decreased by $14 5 million compared to the prior year, primarily due to a decrease in net proceeds from short and long term certificates of deposit related to management of our cash balances in Trinidad partially offset by an increase in construction.
Expenditures year over year.
With respect to Trinidad as of the end of our fiscal fourth quarter. Our Trinidad subsidiary had another dollar denominated cash cash equivalents and short and long term investments measured in U S dollars of approximately $52 9 million a decrease of $23 $8 million from the end of our.
Our fiscal third quarter. This decrease was largely due to the fact that our ability to source U S. Dollars remained relatively constant during the quarter, but our use of U S. Dollars was dramatically decreased due to the COVID-19 related closures and limitations on sales, which had further decreased our imports.
Following the full reopening of the clubs in the fourth quarter, we began.
Again, a measured process of increasing our imports. We currently expect the operational sources and uses of U S dollars in Trinidad to view, our equalize on a go forward basis.
$177 million change from cash provided by the cash used in financing activities was primarily the result of a net.
Decrease in proceeds from long term debt and net repayments with short term borrowings we continue to be vigilant about our cash position and are ready to adapt to sudden changes in circumstances.
In the prior year period, we executed long term loans, primarily to finance purchase of land and construction of several of our warehouse clubs and increased our short term borrowings.
As part of our cash management strategy in the early stages of the pandemic. However, as I mentioned previously in Q3, we finished repaying all of our short term borrowings while some uncertainty and risks remain in our markets. We can feel confident in our operations and our ability to generate and access sufficient cash for our needs. While also continuing.
Turning to invest in the future.
In closing we are very pleased about the results of the current quarter and fiscal year <unk>.
Since we have made and are making in talent data and technology and other capabilities combined with our commitment to the six rights have been the foundation to our past and recent success.
We are looking forward to our growth opportunities for years to come.
And to your support and engagement in our journey.
I will now turn the call over to the operator to take your questions.
Operator, you may now start taking our callers questions.
We will now begin the question and answer session.
Ask a question you May press Star then one on your Touchtone phone.
Okay.
Finally.
Please pickup your handset before pressing the cool COVID-19.
Your question. Please press Star then two.
At this time, we will pause for a moment to assemble our roster.
Our first question today comes from Jon Braatz, with Kansas City capital.
Good.
Good morning, Sherry Michael.
Or is there any good morning Sherry.
Sherry Michael could you walk through the.
The impact of the Aero Hydro post disposition for me you know the legacy business was sort of I guess doing maybe $40 million to $45 million in revenues.
At about a 60% gross margin.
And obviously with the disposition you lose that I guess, you lose most of that gross gross profit but.
Where is the offset because you had mentioned that it was sort of going to have a neutral impact on the business.
What cost you are going to go away with.
With the disposition of a P.
Yes, So hi, John Yeah. So.
Definitely we are there.
The loss of revenue, but they're also a decrease in costs, we had some other operational expenses and our cost of goods sold area to.
To support that activity and then we also have.
G&A expenses to support that activity so.
You know overall I think we said that we're not expecting a material impact.
But there will be a.
Net probably a net decrease in overall cost in general.
Okay, so although not material, okay, so and will there be any.
With with the sale would there be any a gain or loss on the sale.
Yeah, we haven't disclosed that but you know as Sherry said, we recovered a significant part of our.
A part of our initial investment and if you remember the basic reasoning rationale behind the original investment was.
But for them to acquire the counting technologies to support our omni channel business, which is what we're basically keeping so the values of the initial acquisition was largely.
Allocated to that.
You know as we said, we're not expecting a material.
In fact, either way between between both a recurring you know.
Revenue and expense net and also the the transaction software for the August we'll disclose more about that in our Q1 earnings right right. Okay. And then I'm sure. You you were talking about like everybody else are the supply chain challenges higher freight costs and all this other stuff.
That everybody else has seen.
As you look into 2022 obviously it looks like some of these things are going to continue.
Do you think it's gonna worse, and a little bit you're going to see some additional pressure pressure on your margins from from the inflationary cost in the supply chain challenges are compared to what we've seen most recently.
Yeah.
As everybody else's is noting b.
Mary costs and the disruption to inventory so as a result of supply chain challenges in container shortages.
He is leading to higher costs.
But we are planning ahead, and we've been very engaged with.
Identifying alternative routes for us to be able to flow the merchandise at the lowest possible cost and this is where our investments in our regional distribution centers is it comes in very handy.
A lot of our long lead items are can be shipped directly into Costa Rica.
And bypass a Miami, we also are mitigating some of this by identifying a product.
Products that can be near short as I mentioned earlier and sourced locally.
But reduces the risk of of the disruption and also.
Some of the higher cost of transfer.
Transportation, So I get where we're in the same boat as everybody else as they say, but I do feel that we're in a position to be able to mitigate much of this but certainly as costs increase because the transportation freight in and other supply chain issue.
That that will.
We'll be ultimately has to be reflected in the pricing.
But again, we're not alone on this we just feel that we've got a good infrastructure to be able to mitigate the impact and remain a cost effective and as efficient as possible.
Sherry are there any specific inventory.
Merchandise.
Sure.
When you look at it.
Sure.
Obviously, you'd like to have more but is there anything.
In particular that Youre short in stock.
At this very moment.
Yes.
No at this time.
There are some very in the amount of items that are hard to get a hold of and and they're more of the discretionary items. You know the special items that have longer lead times are.
And and you know there we've noticed in some areas and that's why as Michael mentioned, we've taken positions.
On certain categories and certain items that we predict are going to be in demand.
And there will be a shortage for example, or scarcity in our markets for some of those items.
And we've taken positions on some of those things to be able to have to be in stocks available to generate the sales and also serve.
The members.
So oh.
And from time to time, there are just that.
Essentials that that do are all of a sudden experienced a surge in local markets. When COVID-19 rates go up so it's a very fluid situation.
But where we're very focused on anticipating.
Those needs and demands and quickly trying to solve for making sure that we've got the product available as best we can okay. Thank you for sure.
Youre welcome.
Our next.
Question comes from Rodrigo extra Gary with Scotiabank.
Yeah.
Thanks, Hi, Sherri and Michael just a question on margins.
Margins in printing to others being a positive impact from the price.
Creases and all that has been happening there any any sense of.
What to expect on the margin front as we hopefully.
See some normalization in Trina.
Yes at this point, where do they go we're we're continuing with her person running it.
Did you see a kind of a good news bad news situation. During Q4, obviously, we would have preferred to clubs be open the whole quarter, but let's.
Once they werent please remember.
Our liquidity kept falling we were able to actually decrease our TT dollar balance, but we're still seeing you know largely those are not able to source the amount of dollars that we would like to source and neither sources. So and there are costs associated with the sourcing we're able to do so at this point we're not.
And turning to pull back on that it's always something we're monitoring including you know for competitive umbrella and then doing the best we can serve our members but.
But at this point, we're not planning on pulling back obviously as I've said I think pretty much every call that that's not something that we would expect to hold permanently to to the extent that those situations.
Normalizes in the market, but at this point, we don't have any plans to support them.
So rodrigo it is something that where.
We're monitoring on an ongoing basis, and and we're not being passive about it we are out.
There are other ways that we are pursuing to be able to source dollars, whether it may be through.
Through our lives that are made available to them and you know efforts to develop manufacturing in the country.
And and we're very closely engaged too.
She's on any opportunity, we can to be able to convert those gpus to U S dollars. So as the situation improves obviously.
The priority would be to.
Reduce that that extra margin.
Because our goal ultimately is to provide the best value to the member, but also make sure that to the extent there is an extra expense associated with converting the teachers to U S dollars that we're recapturing that.
Got it.
On your earlier remarks sure you touched on the growth of the real estate team I was just wondering if you could share more color on that like where are they based are you restructuring how you think about.
Your team.
Uh huh.
The region any any changes that you can highlight on some of these initiatives.
Well.
In order to accelerate our our.
Process with regard to our strategic plan for growth and we have increased our.
Yeah, I think in that area and also supports for analysis of real estate investments.
And.
It's it's yielded cross a stronger pipeline at this point in time, nothing I can specifically.
0.2 in terms of.
When and.
Which are going to be the ones that prove out to be the right investments for us, but there's definitely a more.
Going on right now in terms of our due diligence and activity in evaluating opportunities for additional clubs.
And you couple that with also the fact that where we now.
Some history with our price more dotcom, the receptiveness of our members, but the growth of delivery.
I have more delivery.
The growing proportion of our price dotcom activities.
And there are some important takeaways for us from that debt allow.
Half look at real estate in a manner that it's.
It's more flexible than it has been in the past because with additional capabilities.
For example, we may not need the same amount of land are we may be able to build smaller format.
We may be able to support clubs in a different way when it comes to dotcom.
Us till mom.
Or support the sale of a petsmart dotcom.
Definitely in terms of fulfillment. These are all things that we're looking at as a result of the recent learnings that we have some.
The investments that we've made in technology and talent and Ah if it's opening doors for us to consider alternatives.
The opportunities are that that I think are.
There's more there's more that we're looking at now are in the pipeline.
Then then in recent history.
No that makes a lot of sense and it's great to hear thanks for the protocol.
Thank you.
This concludes our question and answer session I'd like to turn the call back over to Sherry Darren Baker for any closing remarks.
I just want to thank everyone for your time and interest in price March are we really appreciate your support and are looking forward to the future. Our team is very excited about everything.
Everything we have in the works and are where we're grateful for your interest take care and have a good Friday.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.