Factors To Know Ahead Of PriceSmart's (PSMT) Q2 Earnings

PriceSmart, Inc. (NASDAQ:PSMT) is slated to report second-quarter fiscal 2019 results on Apr 9. In the last four quarters, this San Diego, CA-based operator of membership shopping warehouse clubs outperformed the Zacks Consensus Estimate by an average of 6.4%. Let’s delve deeper into the factors that are likely to influence the results.

How Are Estimates Shaping Up?

The Zacks Consensus Estimate for earnings for the quarter under review is pegged at 56 cents compared with 89 cents reported in the year-ago quarter. We note that the Zacks Consensus Estimate has plummeted 29 cents in the past seven days. The Zacks Consensus Estimate for revenues is pegged at $853.4 million, reflecting a marginal improvement of 1.7% from the year-ago quarter.

Factors Playing Key Role

PriceSmart has been grappling with soft comparable net merchandise sales performance for quite some time now. We note that comparable net merchandise sales in February fell 1.9%, following a decline of 1.4% in January. The impact of adverse currency fluctuations on comparable net merchandise sales cannot be ignored which hurt the metric by 3.8% during the month of February.

Additionally, PriceSmart has been battling cost-related hurdles. During the first quarter of fiscal 2019, warehouse club and other operations expenses increased by 6.8%, while general and administrative expenses surged 45.2%. Increase in SG&A expenses may be attributed to the Aeropost’s acquisition and the opening of new clubs.

Certainly, PriceSmart’s strategy to sell limited products at lower prices helped it to generate member loyalty. Moreover, this operator of membership warehouse clubs’ healthy membership renewal rate reflects its strength. The company also focuses on increasing the number of private label products sold under Member’s Selection brand. Moreover, the company has been concentrating on adding local and regional distribution centers to augment smooth flow of merchandise. Apart from these, the company is experimenting new small warehouse club format.

What the Zacks Model Unveils

Our proven model does not conclusively show that PriceSmart is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

PriceSmart has a Zacks Rank #5 (Strong Sell) and an Earnings ESP of 0.00%, consequently making the surprise prediction difficult.

Stocks With Favorable Combination

Here are few companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

The Estee Lauder Companies (NYSE:EL) has an Earnings ESP of +1.49% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Bed Bath & Beyond (NASDAQ:BBBY) has an Earnings ESP of +2.17% and a Zacks Rank #3.

Constellation Brands (NYSE:STZ) has an Earnings ESP of +1.09% and a Zacks Rank #3.

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