On Wednesday, Jefferies updated its outlook on PriceSmart (NASDAQ:PSMT), increasing the share price target to $90 from $82, while reaffirming a Buy rating on the stock. The firm cited the company's robust revenue growth and solid second-quarter performance as key drivers for the revised target.
PriceSmart reported a 13.1% increase in revenues, totaling $1.29 billion for the second quarter ending February 29, 2024, an uptick from the 10.6% growth observed in the first quarter.
Same-store sales growth was significant, registering at 8.8% in US dollars, aided by a favorable foreign exchange impact of 3.6%. This growth propelled net earnings to rise by 28%, reaching $39.3 million or $1.31 per share, with a half-year total of $2.54 per share, marking a 23% year-over-year increase.
The company's effective tax rate decreased to 30.5% from 34.0%, primarily due to the absence of separation costs that were incurred in the previous year related to the former CEO's departure. Adjusted EBITDA for the company stood at $84.1 million, a 6% year-over-year increase, despite higher expenditures in IT, management compensation, and professional fees.
In addition to financial growth, PriceSmart declared a special dividend of $1.00 per share. Total net merchandise sales grew by 13.0% in the second quarter and by 11.9% in the first half of the year. This was complemented by a 10.0% increase in transactions and a 2.7% rise in average ticket for the second quarter, alongside a 9.1% increase in transactions and a 2.5% rise in average ticket for the first half of the year.
December marked a historic milestone for PriceSmart with sales reaching $511 million, the highest for any month in the company's history. Membership also saw positive trends, with the company reaching 1.86 million members and an 88.3% renewal rate, up from 87% in 2023.
Membership income grew by 14.6% to $18.5 million. Furthermore, PriceSmart increased the annual fee for Diamond and Platinum Memberships by $5 in most markets during the first half of 2024, with an average fee of $37.60.
InvestingPro Insights
Following Jefferies' optimistic update on PriceSmart, InvestingPro data further substantiates the company's financial health and market position. PriceSmart's market capitalization stands at a robust $2.37 billion, indicating a substantial presence in the retail sector. The company's P/E ratio, a measure of its current share price relative to its per-share earnings, is 19.74, which has adjusted slightly lower to 18.51 over the last twelve months as of Q1 2024. This figure suggests a premium valuation, which may reflect investor confidence in PriceSmart's growth prospects and market strategy.
InvestingPro Tips highlight that PriceSmart's management has been actively engaging in share buybacks, signaling confidence in the company's value. Additionally, PriceSmart has a commendable track record of raising its dividend for three consecutive years, with dividend payments maintained for 18 consecutive years—an attractive point for income-focused investors. It's worth noting that the company's gross profit margin stands at 17.19%, which could be an area for improvement. Nevertheless, PriceSmart's cash flows are strong enough to cover interest payments, and its liquid assets surpass short-term obligations, indicating a healthy financial position.
For readers interested in a deeper dive into PriceSmart's financials and strategic outlook, InvestingPro offers additional insights and metrics. There are currently 9 more InvestingPro Tips available that can provide a comprehensive understanding of PriceSmart's performance and future potential. To access these insights, consider subscribing to InvestingPro with an exclusive offer: use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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