PriceSmart is the largest membership warehouse club operator in Central America and the Caribbean. The company has four types of merchandise: sundries, food, hardlines, and softlines but it also receives revenues from membership holders. PriceSmart operates 26 stores with the majority of them in Costa Rica (5) and Columbia Panama (4). However, because most of its operations are based globally, PSMT exposes itself to international risk. In addition, with many of its larger competitors looking to expand globally into PSMT's markets, PSMT's revenues can be negatively affected with its disadvantage in brand name recognition and company size.
Net sales increased 11.5% to $1.40 billion. Net income increased 16.5% to $49.3 million. These positive results are attributed to PSMT's expansion during the year with acquisition of real estate and new store openings.
PSMT's sales consist almost entirely of its international operations with 27 warehouse clubs operating outside of North America. In addition, PSMT is continuously looking to expand its operations in its current geographic region, such as its acquisition of a new Costa Rica warehouse club and property in Panama and Trinidad in FY 2009. As a result, with global operations, PSMT is exposed to risks such as foreign exchange rates, changes in tariff and tax laws, trade restrictions, political/economic/social conditions in these foreign countries, etc.
Although PSMT is the largest warehouse distributor in Central America and the Caribbean, it is not the largest globally. Instead, its direct competitors, such as Walmart, Costco, and Target are all significantly larger and rank 1st, 8th, and 9th in largest global retailers by revenue. In addition, these stores have moved to expand internationally; for example, with Walmart having successfully penetrated Brazil, Costa Rica, and other parts of Central America and with Costco and Target looking to expand internationally as well. As a result, these competitors have greater resources, buying power, and name recognition, which could draw PSMT's current customers. In turn, this could negatively impact PSMT's revenues.
However, PSMT differentiates itself from its competition through smaller store sizes, lower membership fees, and tailored merchandise according to local preferences.