PriceSmart, inc (NASDAQ:PSMT)
Q4 2021 Earnings Call
Oct 22, 2021, 12:00 p.m. ET
- Prepared Remarks
- Questions and Answers
- Call Participants
Good day, everyone, and welcome to PriceSmart, Inc. Earnings Release Conference Call for the Fourth Quarter of Fiscal Year 2021, which ended on August 31, 2021. After remarks from our company’s representatives, Sherry Bahrambeygui, Chief Executive Officer; and Michael McCleary, Chief Financial Officer, you 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 22, 2021. A digital replay will be available following the conclusion of today’s call through October 29, 2021, by dialing 1 (877) 344-7529 for domestic callers or 1 (412) 317-0088 for international callers and by entering the replay access code 10159925.
For opening remarks, I would like to turn the call over to PriceSmart’s Chief Financial Officer, Michael McCleary. Please proceed, sir.
Michael L. McCleary — Executive Vice President and Chief Financial Officer
Thank you, and welcome to the PriceSmart earnings call for the fourth quarter of fiscal year 2021. We will be discussing 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.pricesmart.com, where you can also sign up for email alerts.
As a reminder, all statements made on this conference call, other than statements of historical fact, are forward-looking statements concerning the company’s anticipated plans, revenues and related matters. 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 statements are based on current expectations and assumptions as of today, October 22, 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, accessible on the SEC’s website at www.sec.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 Bahrambeygui, PriceSmart’s Chief Executive Officer. Sherry, you’re on mute, I think.
Sherry S. Bahrambeygui — Chief Executive Officer
Pardon me. Thank you, Michael. Good day, everyone. Thank you for joining us and for your interest in PriceSmart. Fiscal 2021 was quite a year. Our team of more than 10,000 dedicated employees really excelled by working together as one team to innovate and respond to the fluid circumstances that 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 as we begin the first quarter of the new fiscal year.
Despite ongoing COVID-related restrictions in some form that has affected most of our clubs, for the fourth quarter of fiscal 2021, net merchandise sales grew 12.7%, and comparable net merchandise sales grew 10.3% 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 it’s ever been since we began reporting it 14 years ago. These fourth quarter results were achieved through improved operational efficiencies, new digital capabilities; optionality for our inventory flow; our e-commerce platform, pricesmart.com; data analytics; incremental member benefits and services; alternative sourcing of goods in response to global supply chain disruptions; expansion of our private label program; and most importantly, the resilience of our dedicated team that has become quite adept at adjusting to rapidly changing dynamics brought on by the pandemic and its varying impact on our market.
We continue to evolve into a more data-driven organization. Our membership model in and of itself differentiates 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 to higher membership renewal rates. 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 markets.
Additionally, we believe that our adherence to the fundamentals of our business, the Six Rights 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 in inventory management, we’ve reduced markdowns, salvaged throwaway and demerge. 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 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-related dip at the end of fiscal 2020. That’s a 7.2% increase from comparable prior year period.
Our trailing 12-month renewal rate was 89.6% for the period ended August 31, 2021, up from 80.5% for the period ending August 31, 2020, and up from 85.7% for the period ending August 31, 2019. This 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 winner in our market.
Our membership model is a key differentiator from our competitors and an important asset. Our investments in technology and new talent that provide valuable data analytics, which, by the way, are expensed, are helping us unlock greater value from our membership data. 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, cultural shifts or 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 clubs. Additionally, to-date, we’re seeing that pricesmart.com transactions generally yield a higher spend per transaction than our average in-club transactions.
During Q4, pricesmart.com, which allows our members to purchase online for curbside pickup or delivery through Click & Go, that represented 3.5% of our net merchandise sales. Click & Go is currently available in all 47 of our clubs.
Our delivery service is growing as a larger proportion of our pricesmart.com sales. Our experience with Click & Go has demonstrated the demand for the service, and the data generated by pricesmart.com and online channels is another way technology has enabled us to enhance the value of the membership. We believe pricesmart.com is providing us a platform for significant sustainable growth for our business and a valuable incremental benefit to our members.
We’re also pleased to see members using pricesmart.com to sign up and renew their membership. Online member sign-ups and renewals, which we refer to as digital membership, provides several advantages to us, including the opportunity for auto renewal and auto payments, which helps to sustain our renewal rate. Digital memberships also provide a more direct way of communicating with members and learning about their preferences. Our focus on converting our members to digital sign-ups and renewals have helped us increase digital finance 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 have helped us better demonstrate the value of this program to our members. Platinum…