Earnings

PriceSmart's Overhead Hit 13.2% Of Revenue, And The CFO Says Tech Spend Is 'A Much Needed Catch Up'

The CFO split a 30-basis-point rise in full-year overhead into 20 for technology and 10 for CEO pay.

PriceSmart's full-year overhead rose to 13.2% of revenue from 12.9%, and Chief Financial Officer Gualberto Hernandez said on the company's earnings call Tuesday that this is "definitely not where we want to be in the long term." PriceSmart, which runs membership warehouse clubs in Central America, the Caribbean and Colombia, traced the increase to technology and a full year of CEO pay.

Twenty basis points tech, ten basis points pay

Answering a Scotiabank analyst, Hernandez said the 30-basis-point rise (0.3 percentage points) in selling, general and administrative costs breaks down as 20 basis points from technology investment and 10 from the CEO's compensation. The fiscal 2025 comparison year carried none of that pay, he said.

Technology spending, he said, "will continue," and he called it "a much needed catch up." Other technology initiatives are still being evaluated.

He also cited one-time items, including about $1.8 million from closing audiology services in clubs. CEO David Price said the company decided at the end of the fourth quarter to drop audiology and use the space to sell merchandise, keeping its health offering focused on optical and pharmacy.

In the fourth quarter, SG&A reached 13.8% of revenue, against 13.5% a year earlier. Operating income rose 8.1% to $57 million, but slipped to 3.8% of revenue from 4%. For the full year, operating income rose 12.3% to $261 million, holding at 4.4% of revenue.

What lifted the tax rate

The fourth-quarter effective tax rate was 25%, against 32% a year earlier. Hernandez said two items contributed about $2.5 million: a $1.9 million reversal of a U.S. tax contingency and $0.6 million from a long-overdue Dominican Republic credit tied to solar panels installed in 2023.

He would not offer a view on next year's rate. It is "very difficult" to project, he said, adding "we don't guide."

Fourth-quarter net income was $37.6 million, or $1.21 per diluted share, against $31.5 million, or $1.02, a year earlier. Full-year net income was $166.6 million, or $5.40 per share.

Colombia's squeezed margin

Asked about Colombia, where operating margin fell again, Hernandez listed costs hitting that segment: about $4.2 million of Chile start-up expenses, a $0.8 million wealth tax, roughly $450,000 in plastic tax, and about $9 million of extra expenses allocated under transfer pricing rules. Colombian fourth-quarter net merchandise sales rose 43.2%, or 15.9% in constant currency.

PriceSmart said comparable sales for the eight weeks ended October 25 rose 11.8%, or 6% in constant currency. Price said a forecasting and replenishment system will not be finished by the second quarter of fiscal 2027 as previously communicated. The company's market value was about $5.3 billion in Tuesday trading.

Price said the company would rather "go slow to go fast" on the system that sets how it forecasts and restocks merchandise, so no firm completion date was offered.