Will PriceSmart’s Earnings Persevere Amid Customer Death Accusations?
PriceSmart (PSMT) plans to release its FQ3’15 earnings on Thursday, after the market closes. It will be interesting to see whether PriceSmart can return to the strong performance seen last year, but the likelihood isn’t great given lower estimates. This quarter, Wall Street is predicting a drop in both EPS and revenue. Last quarter, the company reported EPS of $0.82, and this quarter both Estimize and Wall Street are predicting a decline to $0.74. Similarly, revenues of $732.12B in FQ2 are expected to drop to $688M. PriceSmart has been underperforming both Wall Street and Estimize estimates for the last two quarters in regards to EPS and revenue.
PriceSmart’s EPS YoY Growth has been declining for the last two quarters by -4% and -12%. However, there has been a slight increase in YoY revenue growth over the last three quarters, of 6%, 8%, and 9%.
PriceSmart owns and operates membership shopping warehouse clubs in Latin America and the Caribbean. Its warehouse clubs sell perishable foods and consumer products to individuals and businesses and offers ancillary services, including food courts and tire and photo centers. PriceSmart faces little competition, and could potentially grow to be the Costco of Central America and the Caribbean.
For the last few weeks PriceSmart has been actively trying to clear their name in the death of a customer who fell ill with food poisoning after consuming pizza sold by the retailer. If the autopsy comes back and shows that the PriceSmart pizza was the culprit, the PR smear could weigh on future earnings as the retailer works to win back customer trust.
It will be interesting to see how PriceSmart’s stock will hold up for this quarter given this recent scandal. It will also be important to monitor how the stronger dollar impacts earnings, as PriceSmart operates all of it’s locations outside of the U.S. but is headquartered in San Diego, California. The repatriation of those sales into US dollars will likely take a bite out of the FQ3 bottom-line as it did in the first and second quarters.
Disclosure: There can be no assurance that the information we considered is accurate or complete, nor can there be any assurance that our assumptions are correct.
I dumped this stock after quarter after quarter of lackluster performance I'd rather own COST..less drama.