Pricesmart Earnings Call Highlights Growth, FX Headwinds

Pricesmart ((PSMT)) has held its Q2 earnings call. Read on for the main highlights of the call.

Pricesmart’s latest earnings call struck an upbeat tone, with management emphasizing broad-based growth in sales, margins and membership metrics alongside disciplined expansion plans. Executives framed foreign-exchange volatility, higher SG&A and working capital demands as manageable headwinds, stressing that strong operating performance and cash generation more than offset these pressures.

Revenue Momentum and Comparable Sales Strength

Pricesmart delivered nearly $1.5 billion in second-quarter net merchandise sales, up 9.9% year over year, or 7.8% in constant currency. Comparable net merchandise sales climbed 7.6% in the quarter and 7.8% year-to-date, underscoring solid underlying demand across the warehouse club network.

Margins and Profitability Move Higher

Gross margin expanded by 50 basis points to 16.1% of net merchandise sales, while total revenue margin rose 60 basis points to 17.7%. Management credited product mix optimization and savings from consolidating Asian sourcing for the improvement, signaling better pricing power and cost control.

Income and EBITDA Growth Underpin the Story

Operating income in the second quarter increased 15.6% to $75.4 million, supported by stronger margins and sales leverage. Net income rose 11.7% to $49.1 million, with adjusted EBITDA up 14.6% to $99.7 million and year‑to‑date adjusted EBITDA advancing 12.3% to $186.6 million.

Colombia Emerges as a Growth Engine

Colombia stood out as a key driver, with net merchandise sales surging 30.5% and comparable sales up 31.3%, helped by peso appreciation and higher traffic. Management also highlighted better assortments in the market, noting that Colombia contributed roughly 360 basis points to consolidated comparable sales growth.

Membership Expansion and Record Renewals

Membership accounts grew 7.9% year over year to about 2.1 million, reinforcing the subscription-like foundation of the model. Renewal rates reached a record 90.2%, while higher-value Platinum memberships climbed to 19.5% of the base, lifting membership income to 1.6% of revenue.

Category Performance Highlights Broad-Based Demand

Food sales grew about 9.2%, with fresh proteins such as seafood, poultry and meat each exceeding 15% growth. Nonfood categories rose roughly 12.4%, while food service, bakery and health services each posted low‑teens gains, and softlines benefited from successful promotional events.

Digital and Omnichannel Channels Gain Traction

Digital sales reached $94.1 million, up 23.4% year over year and representing 6.4% of net merchandise sales, the company’s highest dollar level to date. Nearly three‑quarters of members now have online profiles and more than a quarter have transacted digitally, with both order volumes and average ticket sizes rising.

Real Estate and Supply Chain Build-Out

Pricesmart opened a new distribution center in Trinidad and is planning additional facilities in Colombia, Jamaica and the Dominican Republic over the next few years. The company also announced five new clubs in the Dominican Republic, Jamaica, Costa Rica and Guatemala, which will take the total footprint to 61 locations once complete.

Private Label and Local Sourcing Efficiencies

Private label penetration increased by roughly 50 basis points in the first half, with a refined methodology putting the share at 26.6% of merchandise sales. Local sourcing initiatives, such as bottled water in Colombia, are helping cut prices by around 23% while reducing the business’s environmental footprint.

Shareholder Returns and Cash Generation

The board approved an annual dividend of $1.40 per share, up 11.1% and marking the fifth straight increase, signaling confidence in cash flows. Operating activities generated $133.3 million in cash in the first six months, and the company closed the quarter with $195.1 million in cash and restricted cash plus about $149.7 million in short‑term investments.

Foreign Currency Volatility and Hedging

Net other expense rose to $8.7 million in the quarter, compared with a $5.1 million loss a year ago, driven mainly by unrealized noncash currency revaluation losses. Costa Rica was cited as a key source of FX volatility, and management is evaluating expanded hedging strategies in selected markets to dampen future swings.

SG&A Drift and Investment-Driven Costs

SG&A expenses increased to 12.7% of total revenue from 12.4%, as currency movements in Colombia, technology investments and new executive compensation weighed on the cost line. Management framed these as strategic expenses tied to growth and modernization initiatives rather than structural inefficiencies.

Working Capital, Inventory and Cash Deployment

Higher inventory levels consumed about $9 million of operating cash flow year-to-date, reflecting support for sales growth and network expansion. Investing cash outflows also rose by $89.9 million, driven by larger short‑term investments and increased spending on property, equipment and long‑term assets.

Liquidity Constraints in Trinidad

The company noted that approximately $76.9 million of cash and short‑term investments are held in Trinidad’s local currency and are not easily convertible to U.S. dollars. While this restricts some flexibility in redeploying funds, management did not signal any immediate operational stress from the constraint.

Geopolitical and Trade Risk Monitoring

Executives flagged potential exposure to higher transportation and fuel costs, as well as shipment delays, stemming from geopolitical tensions affecting vital shipping lanes. They also reiterated that evolving U.S. tariff policies have not had a material impact so far but remain an area of close monitoring.

System Implementations and Operational Headwinds

Pricesmart is rolling out a new forecasting and replenishment platform along with other systems that could create short-term disruption as teams climb the learning curve. Management acknowledged these implementation risks but believes early benefits are emerging and that long‑term efficiency gains will be meaningful.

Shifts in Basket Composition

Even as average ticket increased 2.2% and transactions grew 7.5%, average items per basket fell about 1% year over year. The company is watching this subtle change in consumption mix, which may reflect member trading patterns and the impact of pricing or category shifts.

Guidance and Outlook

Looking ahead, management expects network expansion, supply chain investments and technology rollouts to sustain growth and improve costs, with five new clubs and multiple distribution centers slated through fiscal 2027. They pointed to March comparable sales growth of 12.3% in U.S. dollars, robust membership and digital engagement, and reiterated that geopolitical and FX risks are being actively managed while tariffs remain a limited factor.

Pricesmart’s call painted the picture of a retailer delivering solid operational execution while investing heavily for future growth and resilience. For investors, strong sales, margin expansion, membership health and a rising dividend appear to outweigh currency volatility and temporary cost pressures, keeping the long-term story intact.