Earnings

PriceSmart's Inventory Overhaul Misses Its Deadline: 'Go Slow To Go Fast'

The warehouse-club chain's forecasting and replenishment system will not be done by the second quarter of fiscal 2027, the CEO said.

PriceSmart, which runs membership warehouse clubs in Central America, the Caribbean and Colombia, will miss the second-quarter fiscal 2027 target it had set for its new forecasting and replenishment system, CEO David Price said on the company's earnings call Tuesday. Price would not say whether the work finishes by fiscal year-end or later.

A system harder than planned

Price said in his prepared remarks that setting up local vendors in each country and some merchandise-management pieces are taking longer than expected, though the international buying team is fully onboarded. The company is still working to finish as soon as practicable.

Asked by an analyst at Scotiabank what caused the delay, when it would end and what costs and margin gains to expect, Price pointed to process complexity. Buying teams across 13 countries run forecasting and replenishment differently, he said, though "not really quite 13" because Aruba and the U.S. Virgin Islands have no buyers of their own. Two U.S. teams, in Miami and San Diego, were simpler to move onto the system.

Standardizing processes and data proved "a bit more complex than maybe we had appreciation for" when the dates were first set, Price said.

No date, outside help

Price said he would "rather go slow to go fast" than rush and damage the business. The company has brought in outside support to study how other retailers with a similar model handle replenishment.

The company "intentionally didn't provide a specific closure date," he said, adding that the work is under review in real time. He called the process so core to the business that it is a real change-management effort, harder than the Workday and Alera rollouts.

Management still expects the system to keep products in stock, reduce spoilage, improve inventory management and raise employee productivity over the long run. No cost or margin figures were given.

A business still growing

The delay comes after a fiscal fourth quarter in which net merchandise sales rose 13.8%, or 7.8% in constant currency, to almost $1.5 billion. Net income was $37.6 million, or $1.21 per diluted share, against $31.5 million, or $1.02, a year earlier. For the full year, net income was $166.6 million, or $5.40 per share.

For the eight weeks ended October 25, comparable net merchandise sales rose 11.8%, or 6% in constant currency. PriceSmart's market value was $5.3 billion in Tuesday trading.

The company said it expects to update investors on its progress on the next quarterly call.