PRICESMART, INC. Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements concerningPriceSmart, Inc.'s ("PriceSmart", the "Company" or "we") anticipated future revenues and earnings, adequacy of future cash flows, omni-channel initiatives, proposed warehouse club openings, the Company's performance relative to competitors and related matters. These forward-looking statements include, but are not limited to, statements containing the words "expect," "believe," "will," "may," "should," "project," "estimate," "anticipated," "scheduled," and like expressions, and the negative thereof. These statements are subject to risks and uncertainties that could cause actual results to differ materially including, but not limited to: adverse changes in economic conditions in the Company's markets, natural disasters, compliance risks, volatility in currency exchange rates, competition, consumer and small business spending patterns, political instability, increased costs associated with the integration of online commerce with our traditional business, whether the Company can successfully execute strategic initiatives, cybersecurity breaches that could cause disruptions in our systems or jeopardize the security of member or business information, cost increases from product and service providers, interruption of supply chains, COVID-19 related factors and challenges, including among others, the duration of the pandemic, the unknown long-term economic impact, the impact of government policies and restrictions that have limited access for our members, and shifts in demand away from discretionary or higher priced products to lower priced products, exposure to product liability claims and product recalls, recoverability of moneys owed toPriceSmart from governments, and other important factors discussed under the captions "Item 1A. Risk Factors" and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year endedAugust 31, 2020 filed with theUnited States Securities and Exchange Commission ("SEC") onOctober 30, 2020 . These risk factors may be updated from time to time in our other filings with theSEC , which are accessible on theSEC's website at www.sec.gov. Forward-looking statements speak only as of the date that they are made, and the Company does not undertake to update them, except as required by law. In addition, these risks are not the only risks that the Company faces. The Company could also be affected by additional factors that apply to all companies operating globally and in theU.S. , as well as other risks that are not presently known to the Company or that the Company currently considers to be immaterial. The following discussion and analysis compares the results of operations for the three months endedNovember 30, 2020 and 2019 and should be read in conjunction with the consolidated financial statements, and the accompanying notes included therein. OverviewPriceSmart began operations in 1996 inSan Diego, California . We own and operateU.S. style membership shopping warehouse clubs inCentral America , theCaribbean andColombia . We also function as a wholesale supplier to a retailer inthe Philippines . We sell high quality brand name and private label consumer products, offer prepared foods through our bakeries and food courts with the option for delivery, and in certain clubs we provide services such as optical and tires at low prices to individuals and businesses. Historically, our typical warehouse buildings have ranged in sales floor size from approximately 40,000 to 60,000 square feet and are located primarily in and around the major cities in our markets to take advantage of dense populations and relatively higher levels of disposable income. Additionally, we operate smaller format clubs, with sales floors ranging from approximately 30,000 to 40,000 square feet. These smaller format clubs are an alternative intended to serve markets where the population is likely to support a smaller club or densely populated urban areas where it is challenging to secure sufficient real estate at a reasonable cost for a larger club. We believe this smaller format has the potential to expand our geographic reach in existing markets and provide more convenience for our members. We continue to invest in technology to increase efficiencies and to enhance the member shopping experience with omni-channel capabilities, including e-commerce online shopping. Most notably, the Company launched its Click & Go™ online order, curbside pickup and delivery service, in fiscal 2020, which provides contactless shopping in all 13 of our markets. We believe that our business success depends on our ability to be the low-cost, high-quality operators in our markets and, in turn, to offer the best value on attractive products and services in a safe and responsible environment. We believe that lower prices on products and services drive sales volume, which increases the Company's buying leverage, which in turn leads to better pricing that we can then offer to our members, validating the annual membership investment that they make. Logistics and distribution efficiencies are fundamental to delivering high quality merchandise at low prices to our members. To reduce the risk of supply chain disruption, we have developed greater supply chain flexibility between ourU.S. and regional distribution centers, which provides us increased flexibility amidst this evolving global environment. We continue to 30 --------------------------------------------------------------------------------
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explore ways to deliver value, improve efficiency, reduce costs and ensure a flow of high quality, curated merchandise to our warehouse clubs.
Purchasing land and constructing warehouse clubs is generally our largest ongoing capital investment. Securing land for warehouse club locations is challenging in several of our markets because suitable sites at economically feasible prices are difficult to find. We believe real estate ownership provides a number of advantages as compared to leasing, including lower operating expenses, flexibility to expand or otherwise enhance our buildings, long-term control over the use of the property and the residual value that the real estate may have in future years. While our preference is to own rather than lease real estate, we have entered into real estate leases in certain cases and will likely continue to do so in the future. Our warehouse clubs currently operate in emerging markets that historically have had higher growth rates and lower warehouse club market penetration than the U.S. market. In the countries in which we operate, we do not currently face direct competition fromU.S. membership warehouse club operators. However, we do face competition from various retail formats such as hypermarkets, supermarkets, cash and carry, home improvement centers, electronic retailers, specialty stores, convenience stores, traditional wholesale distribution and growing online sales.
The number of warehouse clubs as of
Number of Number of
Warehouse Clubs Warehouse Clubs
in Operation as of in Operation as of
Country/Territory November 30, 2019 November 30, 2020
Costa Rica 7 8
Colombia 7 7
Panama 7 7
Dominican Republic 5 5
Trinidad 4 4
Guatemala 4 4
Honduras 3 3
El Salvador 2 2
Nicaragua 2 2
Aruba 1 1
Barbados 1 1
U.S. Virgin Islands 1 1
Jamaica 1 1
Totals 45 46
Our warehouse clubs and local distribution centers are located in Latin America
and the Caribbean , and our corporate headquarters, U.S. buying operations and
regional distribution centers are located primarily in the United States . Our
operating segments are the United States , Central America , the Caribbean and
Colombia . We held the grand opening of our newest warehouse club in
Bogotá, Colombia on December 4, 2020 , bringing to 47 the total number of
warehouse clubs in operation. This warehouse club is located within the Usaquén
locality on the northern side of Bogotá, Colombia . The Usaquén club is our third
warehouse club in the greater metropolitan area of Bogotá and eighth
in Colombia .
While we continue to closely monitor developments arising from the outbreak of
COVID-19 and recognize that the potential social and economic impacts in the
markets where we operate and any resulting consequences to our results of
operations and cash flow remain unknown, we have decided to proceed with the
construction of two standard format warehouse clubs on land we previously
acquired. First, will be a warehouse club located within the Zone 5 locality of
Guatemala City , Guatemala , which will be our fifth warehouse club located in
Guatemala . We expect to open this warehouse club in the first quarter of fiscal
2022. Second, will be a warehouse club located within the city of
Portmore, Jamaica . Portmore is a suburb west of the capital city of Kingston . We
expect to open this warehouse club, which will be our second warehouse club in
Jamaica , in the third quarter of fiscal 2022.
We also operate a package forwarding business (casillero) and marketplace
business under the "Aeropost" banner in 38 countries in
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Factors Affecting Our Business
The COVID-19 pandemic resulted in significant challenges across our 13 markets in the second half of fiscal 2020. Many markets imposed limitations, varying by market and in frequency, on access to the Company's clubs and on the Company's club operations, including in some cases frequent temporary club closures, a reduction in the number of days during the week and hours per day the Company's clubs are permitted to be open, restrictions on segments of the population permitted to shop or circulate on particular days, and significant limits on the number of people permitted to be in the club at the same time. We also experienced product mix shifts due to changing consumer habits, decreases in purchases by many business members, particularly restaurants and hotels, and sporadic supply chain challenges, which can impact inventory levels. In response, early in calendar year 2020 we identified four main priorities:
?Protect the safety and well-being of our employees and our members.
?Take proactive measures to protect our supply chain.
?Expand technology-enabled shopping.
?Manage cash and capital resources.
Our priorities today remain the same and have become an integral part of our normal, everyday business operations. However, due to the unpredictability of the duration and intensity of the COVID-19 pandemic, we continue to see periodic reinstatements of stay-at-home orders and other restrictions. In addition, we expect continued uncertainty in the economies of our markets as a result of the pandemic and expect volatility in employment trends, industry and consumer confidence; volatility in foreign currency exchange rates and commodity prices; and possible fiscal austerity measures taken by governments in our markets, which will likely impact our results for the foreseeable future. For additional information, refer to the risk factors discussed in Part I. "Item 1A. Risk Factors" in the Company's Annual Report on Form 10-K for the year endedAugust 31, 2020 . Yet, as we have adapted to this continuing crisis, we are focused on opportunities for the future. We have decided to move forward with plans to construct two new warehouse clubs. One in Portmore,Jamaica and the other inGuatemala City ,Guatemala . Although we do expect some transfer of sales from the existing warehouse clubs that are in close proximity to these new locations, these locations provide opportunity for incremental membership, net merchandise sales growth, and greater convenience for our existing members. Our Click & Go™ curbside and delivery service contributed approximately 3.1% of total net merchandise sales for the fiscal first quarter endedNovember 30, 2020 . The demand for delivery through our Click &Go™ service has been increasing and represents a growing proportion of total Click & Go™ sales. Developing greater efficiencies remains a priority especially within these new sales channels. We believe that Click & Go™ curbside and delivery services will remain important alternative shopping methods and provide increased value for our members by enabling them to leverage their membership across multiple shopping platforms. We also see value in the insights gained by communicating with our members through a variety of our online channels. Beyond Click & Go™, we continue to invest in technology to increase efficiencies, enhance our member experience by enabling additional omni-channel capabilities, and finding new ways to generate value and benefits for our members and the Company. Increasing "same store" sales is an important element of our growth strategy. We believe that there is a number of ways to increase same store sales. We are committed to increasing same store sales by increasing the number of member transactions and by increasing the average ticket. We have started or recently completed expansions and/or remodels of several clubs in ourCentral America segment in fiscal 2021 that we believe will contribute to same store sales growth. Also, at the end of fiscal year 2020 we had our first "Membership Appreciation Week" promotion, and at end of our first quarter of fiscal 2021, we expanded the duration of our "Smart Week" promotion and held it across all of our markets. We have also increased our digital marketing efforts, which has resulted in enhanced reach and visibility of our promotions, contributing to the success of these programs. In an effort to provide healthy options for our members, we source additional high quality fresh products through our Direct Farm Program. We believe that our Direct Farm Program reduces costs and improves quality on our fresh produce offerings, while simultaneously supporting local farmers and industry. Our produce distribution centers allow us to provide farm-to-table produce quicker and more efficiently. We opened two produce distribution centers in fiscal 2020 and expect to continue to expand this program and build additional produce distribution centers as we expand into more of our markets in fiscal 2021.
Overall economic trends, foreign currency exchange volatility, and other factors impacting the business
Our sales and profits vary from market to market depending on general economic
factors, including GDP growth; consumer preferences; foreign currency exchange
rates; political policies and social conditions; local demographic
characteristics (such as population growth); the number of years we have
operated in a particular market; and the level of retail and wholesale
competition in that market. The economies of many of our markets are dependent
on foreign trade, tourism, and foreign direct
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--------------------------------------------------------------------------------Table of Contents investments. Global and local travel restrictions and the general slowdown in global economic activity as a result of COVID-19 have significantly impacted and may continue to impact the economies in our markets, causing significant declines in GDP and employment and devaluations and illiquidity of local currencies against theU.S. dollar. In general, positive conditions in the broader economy promote greater member spending in our warehouse clubs, and economic weakness generally results in a reduction of customer spending. Currency fluctuations can be one of the largest variables affecting our overall sales and profit performance, as we have experienced in prior fiscal years, because many of our markets are susceptible to foreign currency exchange rate volatility. During the first three months of fiscal year 2021 and 2020, approximately 77.8% and 77.0%, respectively, of our net merchandise sales were in currencies other than theU.S. dollar. Of those sales, 49.5% and 52.0% were comprised of sales of products we purchased inU.S. dollars for each period, respectively. A devaluation of local currency reduces the value of sales and membership income that is generated in that country when translated toU.S. dollars for our consolidated results. In addition, when local currency experiences devaluation, we may elect to increase the local currency price of imported merchandise to maintain our target margins, which could impact demand for the merchandise affected by the price increase. We may also modify the mix of imported versus local merchandise and/or the source of imported merchandise to mitigate the impact of currency fluctuations. Information about the effect of local currency devaluations is discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Net Merchandise Sales and Comparable Sales." Our capture of total retail and wholesale sales can vary from market to market due to competition and the availability of other shopping options for our members. Demographic characteristics within each of our markets can affect both the overall level of sales and future sales growth opportunities. Island markets such asAruba ,Barbados and theU.S. Virgin Islands offer us limited upside for sales growth given their overall market size. Countries with smaller upper and middle class consumer populations, such asHonduras ,El Salvador ,Jamaica andNicaragua , offer growth potential but may have a more limited market opportunity for sales growth as compared to more developed countries with larger or growing upper and middle class consumer populations. Political and other factors in each of our markets may have significant effects on our business.U.S. foreign policy can also have an impact on the social and economic stability in the countries where we operate. For example, the transition in theU.S. Government , as a result of the recent presidential election, could result in changes inU.S. foreign policy towardsLatin America that could impact the business environment in the countries we serve. Our operations are subject to volatile weather conditions and natural disasters. InNovember 2020 , Hurricanes Eta and Iota brought severe rainfall, winds, and flooding to a significant portion ofCentral America , especiallyHonduras , that caused significant damage to parts of that country's infrastructure. Although our warehouse clubs in the region are operating normally and we have been able to manage our supply chain to keep our warehouse clubs stocked with merchandise, the combination of the COVID-19 pandemic and the damage caused by the hurricanes could adversely impact our overall sales and profit performance in the future. In the past, we have experienced a lack of availability ofU.S. dollars in certain markets (U.S. dollar illiquidity), particularly inTrinidad . This can and has impeded our ability to convert local currencies obtained through merchandise sales intoU.S. dollars to settle theU.S. dollar liabilities associated with our imported products or to otherwise redeploy these funds in our Company, increasing our foreign exchange exposure to any devaluation of the local currency relative to theU.S. dollar. We continued to experience significant limitations on our ability to convertTrinidad dollars toU.S. dollars or other tradeable currencies during fiscal 2020, with a further deterioration and the problem becoming more acute inAugust 2020 and into the second quarter of fiscal year 2021. We are working with our banks inTrinidad and government officials to source tradeable currencies, but until moreU.S. dollars or other tradeable securities become available, this illiquidity condition is likely to continue. As ofNovember 30, 2020 , ourTrinidad subsidiary hadTrinidad dollar denominated cash and cash equivalents and short and long-term investments measured inU.S. dollars of approximately$100.5 million , an increase of$20.9 million fromAugust 31, 2020 when these same balances were approximately$79.6 million . TheTrinidad central bank manages the exchange rate of theTrinidad dollar with theU.S. dollar. While the recently elected government has publicly stated it has no intention to devalue theTrinidad dollar, theTrinidad government could in the future decide to devalue the currency to improve market liquidity, resulting in a devaluation in theU.S. dollar value of these cash and investments balances. If, for example, a hypothetical 20% devaluation of theTrinidad dollar were to occur, the value of ourTrinidad dollar cash and investments position, measured inU.S. dollars, would decrease by approximately$20.1 million , with a corresponding increase in Accumulated other comprehensive loss reflected on our consolidated balance sheet. Separate from theTrinidad dollar denominated cash and investments balances described above, as ofNovember 30, 2020 , we had aU.S. dollar denominated monetary liability position of approximately$14.4 million inTrinidad (net ofU.S. dollar denominated assets) that would produce a loss from a potential devaluation ofTrinidad dollars. If, for example, a hypothetical 20% devaluation of theTrinidad dollar occurred, the net effect on 33 --------------------------------------------------------------------------------
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Other income (expense), net on our consolidated statement of operations of
revaluing these
We are carefully monitoring the situation inTrinidad and are taking various steps to mitigate the risks. For example, as liquidity conditions have tightened, we have methodically raised prices on imported goods and have sought to shift the purchase of certain goods to local sources, where appropriate. Additionally, we are actively seeking to exchangeTrinidad dollars for tradeable currencies, in order to manage our exposure to any potential devaluation. Moreover, in the first quarter of fiscal 2021, we began limiting shipments of goods from theU.S. toTrinidad . As a result, beginning in the second quarter of fiscal 2021, ourTrinidad subsidiary will not carry its usual mix and quantity of merchandise. We believe this reduction in imported merchandise will negatively impact sales inTrinidad in our second fiscal quarter by an estimated$14.0 million to$18.0 million . We plan to increase or decrease shipments from theU.S. in line with our ability to exchangeTrinidad dollars for other hard currencies. OurBarbados subsidiary also recently began facing aU.S. dollar liquidity situation. TheBarbados dollar has a conventional fixed-peg currency arrangement, in which theBarbados dollar exchange rate is fixed to theU.S. dollar. Thus, although we do not expect a devaluation of this currency, at this time, as ofNovember 30, 2020 , ourBarbados subsidiary hadBarbados dollar denominated cash and cash equivalents measured inU.S. dollars of approximately$12.8 million , which cannot be readily converted toU.S. dollars for general use within the Company.
Mission and Business Strategy
Our mission is to serve as a model company, which operates profitably and
provides a good return to our investors, by serving our members in emerging and
developing markets, with safe, clean buildings, equipment and work environment,
and by providing good jobs, fair wages and benefits, quality merchandise and
services at compelling prices that are made accessible to a broader segment of
the population, while treating our suppliers right, empowering them where we
can, and conducting ourselves in a socially responsible manner and by respecting
the environment and the laws of all the countries in which we operate. To do
this, we make available a wide range of high quality, curated merchandise
sourced from around the world at good value. The annual membership fee enables
us to operate our business with lower margins than traditional retail stores.
Through the use of technology and the development of an omni-channel platform,
we are pursuing opportunities to satisfy our members' shopping expectations,
create additional efficiencies in the supply chain and better understand and
serve our members' needs to play greater role in their lives. We strive to
establish a relationship with our members that enhances their lives with quality
goods and services and offers a shopping experience that blends the excitement
and appeal of our brick and mortar business with the convenience of online
shopping and services.
Growth
We measure our growth primarily by the amount of the period-over-period activity
in our net merchandise sales, our comparable club net merchandise sales,
membership income and total revenues. Our investments are geared toward creating
greater efficiencies, which enable us to offer lower prices, better services,
enhanced convenience and exciting experiences for our members, which we believe
will support membership renewals and sustained growth for the Company. However,
these investments can impact near-term results, such as when we invest in
technology and talent that are expected to yield long-term benefits or when we
incur fixed costs in advance of achieving full projected sales, negatively
impacting near-term operating profit and net income. When we open a new
warehouse club in an existing market, which may reduce reported comparable net
merchandise sales due to the transfer of sales from existing warehouse clubs, we
do so to enhance the member experience, grow membership and support long-term
sales growth and profitability.
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Financial highlights for the first quarter of fiscal year 2021 included:
?Total revenues increased 8.1% over the comparable prior year period.
?Net merchandise sales increased 7.7% over the comparable prior year period. We ended the quarter with 46 warehouse clubs compared to 45 warehouse clubs at the end of the first quarter of fiscal 2020. Foreign currency exchange rate fluctuations impacted net merchandise sales negatively by 3.5% versus the comparable three-month period.
?Comparable net merchandise sales (that is, sales in the 43 warehouse clubs that have been open for greater than 13 ½
calendar months) for the 13 weeks ended
?Membership income for the first quarter of fiscal 2021 decreased 3.3% to
?Total gross margins (net merchandise sales less associated cost of goods sold) increased 16.2% over the prior-year period, and merchandise gross profits as a percent of net merchandise sales were 16.1%, an increase of 120 basis points (1.2%) from the same period in the prior year. The increase is attributable to more focused merchandising strategies, inventory management, and pricing actions to offset foreign currency exchange costs. ?Operating income for the first quarter of fiscal 2021 was$44.5 million , an increase of 45.0%, or$13.8 million , compared to the first quarter of fiscal 2020. ?We recorded a$1.5 million net currency loss from currency transactions in the first quarter of fiscal 2021 compared to a$1.7 net currency loss in the same period last year. ?Our effective tax rate increased in the first quarter of fiscal 2021 to 32.9% from 32.2% in the first quarter of fiscal 2020 primarily from the unfavorable impact in the current period from the effect of changes in foreign currency value and related adjustments. ?Net income attributable toPriceSmart for the first quarter of fiscal 2021 was$27.7 million , or$0.90 per diluted share, compared to$19.7 million , or$0.64 per diluted share, in the first quarter of fiscal 2020.
COMPARISON OF THE three months ended
The following discussion and analysis compares the results of operations for the three-month period ended onNovember 30, 2020 with the three-month period ended onNovember 30, 2019 and should be read in conjunction with the consolidated financial statements and the accompanying notes included elsewhere in this report. Unless otherwise noted, all tables on the following pages presentU.S. dollar amounts in thousands. Certain percentages presented are calculated using actual results prior to rounding.
Net Merchandise Sales
The following tables indicate the net merchandise club sales in the segments in which we operate and the percentage growth in net merchandise sales by segment during the three months endedNovember 30, 2020 and 2019. Three Months Ended November 30, 2020 November 30, 2019 Increase % of net ?from % of net Amount ?sales ?prior year Change Amount ?sales Central America$ 485,040 57.8 %$ 28,289 6.2 %$ 456,751 58.6 % Caribbean 254,606 30.4 23,455 10.1 231,151 29.7 Colombia 98,723 11.8 7,897 8.7 90,826 11.7 Net merchandise sales$ 838,369 100.0 %$ 59,641 7.7 %$ 778,728 100.0 %
Comparison of Three Months Ended
Overall, total net merchandise sales grew 7.7% for the first quarter endedNovember 30, 2020 compared to the same quarter in the prior year. The increase resulted from a 15.9% increase in average ticket, partially offset by a 7.1% decrease in transactions. Transactions represent the total number of visits our members make to our warehouse clubs and Click & Go™ curbside pickup and delivery service transactions. Average ticket represents the amount our members spend on each visit or Click & Go™ order. 35 --------------------------------------------------------------------------------
Table of Contents During the first quarter of fiscal year 2021, net merchandise sales were positively impacted by a higher average ticket for the period, but the number of transactions decreased in comparison to the three-month period endedNovember 30, 2019 , as the COVID-19 pandemic has reduced the number of visits our members make due to governmental restrictions and/or health concerns regarding the virus. In addition, during the last week ofNovember 2020 , we held our Smart Week promotion across all of our markets for an entire week, compared to the Smart Weekend promotion we held only in theCaribbean segment for one weekend the previous year. Lastly, we had 46 clubs in operation as ofNovember 30, 2020 compared to 45 clubs as ofNovember 30, 2019 . Two of our warehouse clubs opened in late October and mid-November of 2019 and therefore, had sales activity for an entire quarter in the current fiscal year compared to only a partial quarter in the comparable prior year period. Net merchandise sales in ourCentral America segment increased 6.2% for the first quarter endedNovember 30, 2020 compared to the same period last year. This increase had a 370 basis point (3.7%) positive impact on total net merchandise sales growth. All of the growth in this market is attributable to the three new clubs in this segment that were not open for the entire quarter in the comparable prior year period. Net merchandise sales in ourCaribbean segment grew 10.1% for the first quarter endedNovember 30, 2020 compared to the same period last year. This increase had a 300 basis point (3.0%) positive impact on total net merchandise sales growth. OurDominican Republic andTrinidad markets led the way in this segment with 18.4% and 11.9% growth, respectively. Both markets have continued to perform well in the current COVID-19 pandemic, despite ourDominican Republic market experiencing significant foreign currency devaluation compared to the prior year period. Net merchandise sales in ourColombia segment increased 8.7% for the first quarter endedNovember 30, 2020 compared to the same period last year. The increase for the three-month period had a 100 basis point (1.0%) positive impact on total net merchandise sales growth. Although the traffic decreased during the first quarter of fiscal 2021 compared to the same three-month period of the prior year, average ticket increased considerably. Relative to some of our other large markets,Colombia had a much smaller decrease in traffic during the first three months of fiscal 2021 as the COVID-19 related restrictions eased during the period and members returned to more normalized shopping patterns in our warehouse clubs. The following table indicates the impact that currency exchange rates had on our net merchandise sales in dollars and the percentage change from the three-month period endedNovember 30, 2020 . The term "currency exchange rates" refers to the currency exchange rates we use to convert net merchandise and comparable net merchandise sales for all countries where the functional currency is not theU.S. dollar intoU.S. dollars. We calculate the effect of changes in currency exchange rates as the difference between current period activities translated using the current period's currency exchange rates and the comparable prior year period's currency exchange rates. We believe the disclosure of the effects of currency exchange rate fluctuations on our results permits investors to understand better the Company's underlying performance. Currency exchange rate fluctuations for the Three months ended November 30, 2020 Amount % change Central America $ (7,463) (1.7) % Caribbean (10,264) (4.4) Colombia (9,701) (10.7) Net merchandise sales $ (27,428) (3.5) %
Overall, the effects of currency fluctuations within our markets had an
approximate
Currency fluctuations had a$7.5 million , or 170 basis point (1.7%), negative impact on net merchandise sales in ourCentral America segment for the three months endedNovember 30, 2020 . The currency fluctuations contributed approximately 100 basis points (1.0%) of the total negative impact on total net merchandise sales. This is primarily due to theCosta Rica market currency devaluation when compared to the same period a year ago. Currency devaluations had a$10.3 million , or 440 basis point (4.4%), negative impact on net merchandise sales in ourCaribbean segment for the three months endedNovember 30, 2020 . The currency devaluations contributed approximately 130 basis points (1.3%) of the total negative impact on total net merchandise sales for the quarter.Jamaica and theDominican Republic markets both experienced currency devaluation when compared to the same period last year. 36 --------------------------------------------------------------------------------
Table of Contents Currency devaluations had a$9.7 million , or 1,070 basis point (10.7%), negative impact on net merchandise sales in ourColombia segment for the three months endedNovember 30, 2020 . The currency devaluations contributed approximately 120 basis points (1.2%) to the total negative impact on total net merchandise sales.
Comparable Merchandise Sales
We report comparable net merchandise sales on a "same week" basis with 13 weeks in each quarter beginning on a Monday and ending on a Sunday. The periods are established at the beginning of the fiscal year to provide as close of a match as possible to the calendar month and quarter that is used for financial reporting purposes. This approach equalizes the number of weekend days and weekdays in each period for improved sales comparison, as we experience higher merchandise club sales on the weekends. Each of the warehouse clubs used in the calculations was open for at least 13 ½ calendar months before its results for the current period were compared with its results for the prior period. As a result, sales related to two of our four warehouse clubs opened during calendar year 2019 and the one club opened during calendar year 2020, will not be used in the calculation of comparable sales until they have been open for at least 13 ½ months. Therefore, comparable net merchandise sales include 43 warehouse clubs for the thirteen week period endedNovember 29, 2020 . The following tables indicate the comparable net merchandise sales in the reportable segments in which we operate and the percentage changes in net merchandise sales by segment during the thirteen-week period endedNovember 29, 2020 andDecember 1, 2019 . Thirteen Weeks Ended November 29, 2020 December 1, 2019 % Increase/(decrease) % Increase/(decrease) in comparable in comparable net merchandise sales net merchandise sales Central America (0.7) % 1.8 % Caribbean 9.9 2.1 Colombia 8.6 (5.2) Consolidated comparable net merchandise sales 3.6 % 1.0 %
Comparison of Thirteen-Week Periods Ended
Comparable net merchandise sales for those warehouse clubs that were open for at least 13 ½ months for some or all of the thirteen-week period endedNovember 29, 2020 increased 3.6%. Comparable net merchandise sales in ourCentral America segment decreased 0.7% for the thirteen-week period endedNovember 29, 2020 . This decrease contributed approximately 40 basis points (0.4%) of negative impact in total comparable merchandise sales. For the thirteen weeks endedNovember 29, 2020 , strong performance in ourHonduras ,El Salvador andNicaragua markets, contributed approximately 150 basis points (1.5%) of positive impact on the segments comparable net merchandise sales, which was offset by a 190 basis point (1.9%) decrease inPanama ,Costa Rica , andGuatemala . During the quarter,Panama andGuatemala experienced sales transfers from existing clubs included in the comparable net merchandise sales calculation to new clubs not included in the calculation, andCosta Rica experienced foreign exchange headwinds, with the Costa Rica Colón devaluing versus the comparable prior year period. Comparable net merchandise sales in ourCaribbean segment increased 9.9% for the thirteen-week period endedNovember 29, 2020 . This increase contributed approximately 300 basis points (3.0%) of positive impact in total comparable merchandise sales. For the thirteen weeks endedNovember 29, 2020 , most of the markets in ourCaribbean segment showed double-digit comparable sales growth compared to the same period in the prior year.Trinidad and theDominican Republic contributed 270 basis points (2.7%) of positive impact on the segment. Up through this quarter, both markets performed well in the current COVID-19 pandemic, despite a significant foreign currency exchange devaluation compared to the prior year period in theDominican Republic .
Comparable net merchandise sales in our
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--------------------------------------------------------------------------------Table of Contents merchandise sales. Average ticket grew compared to the prior year three-month period and is the primary driver of the increase as COVID-19 restrictions eased during the period and members were more easily able to shop in our warehouse clubs.
The following tables illustrate the impact that changes in foreign currency
exchange rates had on our comparable merchandise sales in dollars and the
percentage change from the thirteen-week period ended
Currency Exchange Rate Fluctuations for the
Thirteen Weeks Ended
November 29, 2020
Amount % change
Central America $ (7,206) (1.6) %
Caribbean (10,253) (4.4)
Colombia (9,533) (10.5)
Consolidated comparable net
merchandise sales $ (26,992) (3.5) %
Overall, the mix of currency fluctuations within our markets had an approximate
Currency fluctuations within our
Currency devaluations within ourCaribbean segment accounted for approximately 130 basis points (1.3%) of the negative impact on total comparable merchandise sales for the thirteen-week period endedNovember 29, 2020 . OurDominican Republic andJamaica markets experienced currency devaluation when compared to the same period last year. Currency devaluations within ourColombia segment accounted for approximately 130 basis points (1.3%) of the negative impact on total comparable merchandise sales for the thirteen-week period endedNovember 29, 2020 . This reflects the devaluation of the Colombian peso when compared to the same period a year ago.
Membership Income
Membership income is recognized ratably over the one-year life of the
membership.
Three Months Ended
November 30, November 30,
2020 2019
Increase Membership
(decrease) ?income % to
from ?net merchandise
Amount prior year % Change ?club sales Amount
Membership income -
Central America $ 7,875 $ (421) (5.1) % 1.6 % $ 8,296
Membership income -
Caribbean 3,711 34 0.9 1.5 3,677
Membership income -
Colombia 1,713 (60) (3.4) 1.7 1,773
Membership income - Total
1.6 %
Number of accounts -
Central America 839,387 (30,286) (3.5) % 869,673
Number of accounts -
Caribbean 427,871 (8,222) (1.9) 436,093
Number of accounts -
Colombia 314,160 (23,863) (7.1) 338,023
Number of accounts -
Total 1,581,418 (62,371) (3.8) % 1,643,789
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Comparison of Three Months Ended
The number of member accounts as ofNovember 30, 2020 was 3.8% lower than the prior year period. Membership income decreased 3.3% over the three month period endedNovember 30, 2020 , compared to the prior-year period. Membership income declined inCentral America andColombia while staying flat in ourCaribbean segment due to a declining membership base in the second half of fiscal year 2020 as a result of lower member traffic in our clubs during the COVID-19 pandemic. Although the membership base is down compared to the comparable prior-year period, we have seen incremental increases in our membership base since the end of our last fiscal year. SinceAugust 31, 2020 , all segments have increased their membership base.Colombia had the largest increase in membership base in the first quarter with 3.7% growth, followed byCentral America with a 1.3% increase and theCaribbean with a 0.3% increase. We began offering our Platinum membership program inNicaragua inOctober 2020 and we intend to expand our Platinum membership program to our one remaining market this fiscal year. The annual fee for a Platinum membership in most markets is approximately$75 . The Platinum membership program provides members with a 2% rebate on most items, up to an annual maximum of$500 . We record the 2% rebate as a reduction on net merchandise sales at the time of the sales transaction. Our trailing twelve-month renewal rate was 81.9% and 86.1% for the periods endedNovember 30, 2020 andNovember 30, 2019 , respectively. Historically, membership renewals have been transacted primarily at the registers in the club at the time of purchase of merchandise or services when a membership has expired. The renewal rate decline contributed to the overall decrease in membership accounts of 3.8% over the same period because of a significant decline of in-club traffic in some of our markets due to governmental COVID-19 movement restrictions on their respective general populaces. Reductions in in-club traffic resulting from the COVID-19 pandemic and a notable increase in online traffic due to our launch of a new online catalogue and Click & Go™ services have driven increased sign-ups and renewals completed online. Approximately 11% and 2% of our membership sign-ups were completed using our online platform for the periods endedNovember 30, 2020 and 2019, respectively. Our online platform facilitates capturing data and provides the opportunity for automatic renewal of memberships.
Other Revenue
Other revenue primarily consists of non-merchandise revenue from freight and handling fees generated from our marketplace and casillero operations, interest-generating portfolio from our co-branded credit cards, and rental income from operating leases where the Company is the lessor.
Three Months Ended
November 30, 2020 November 30, 2019
Increase
(decrease) from
Amount prior year % Change Amount
Non-merchandise revenue $ 12,655 $ 3,810 43.1 % $ 8,845
Miscellaneous income 1,497 (112) (7.0) 1,609
Rental income 731 (8) (1.1) 739
Other revenue $ 14,883 $ 3,690 33.0 % $ 11,193
Comparison of Three Months Ended
Other revenue for the three months endedNovember 30, 2020 includes non-merchandise revenue generated by the marketplace and casillero operations of a company we acquired inMarch 2018 , primarily from freight and handling charges for online orders placed from customers inLatin America to retailers inthe United States and delivered to locations throughoutLatin America . The primary driver of the$3.7 million increase in other revenue is due to a$3.8 million increase in non-merchandise revenue compared to the prior year from higher package volume in our marketplace and casillero operations during the current quarter compared to the comparable prior year period. 39 --------------------------------------------------------------------------------
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