PriceSmart Grew 12% and the Stock Fell 9%: The Bill for 'Going Slow to Go Fast'

A strong fiscal Q4 hides an FX-flattered comp, a slipping forecasting-system rollout, and a margin story the market is no longer willing to pre-pay for.

PSMT · Earnings Call · 2026-10-27

The Beat Nobody Paid For

PriceSmart closed fiscal 2026 with almost $5.8 billion in Total net merchandise sales, up 11.7% for the year and 13.8% in the fourth quarter, with comparable sales up 12.2%. Average ticket rose 7.5% in Q4 — members came more often and spent more, the cleanest possible confirmation of the warehouse-club model. Diluted EPS of $1.21 was up roughly 19%. And the stock is down 9% over the last 90 days, sitting 15.9% below its July 2 peak of $197.90. That is the puzzle worth solving. Two things explain the gap. First, the quality of the comp. Dollar comps of 12.2% become 6.2% in constant currency; Colombia's 44.2% comp becomes 16.3% ex-FX. Roughly half the headline growth is the Colombian peso doing the work, and a peso tailwind on sales is equally a peso headwind on expenses — a symmetry Gualberto Hernandez was at pains to spell out. Second, the tax rate: 25% in Q4 against 32% a year ago, helped by about $2.5 million of discrete items (a $1.9 million U.S. contingency reversal, a $0.6 million Dominican solar credit). Strip those and the EPS beat thins considerably. The multiple makes all of this matter more. At 37.6x trailing earnings, PriceSmart is not priced like a 4.4%-operating-margin grocery distributor; it is priced like a compounding membership annuity. At that price, execution slips get marked to market quickly.

RELEX Slips, and With It the Margin Thesis

Which brings us to the single most important sentence on the call. The RELEX forecasting and replenishment system — the machinery that was supposed to improve in-stock rates, cut spoilage, and lift employee productivity — will not be finished on schedule.

That means we will not finish by the second quarter of fiscal year 2027, as previously communicated, but we are continuing to work towards completing implementation as soon as practicable.
David Price, Chief Executive Officer · 2026-10-27

Asked twice for a new date, David Price declined to give one, offering instead that “I really try to go by the mantra of "let's go slow to go fast," because I would rather get this right” — David Price, Chief Executive Officer · 2026-10-27. That is defensible management logic — thirteen countries, wildly divergent local buying processes, genuinely core processes. It is also, for a third straight year, a promise of future efficiency rather than delivered efficiency. And the market is currently financing that promise. Already, effective SG&A has climbed to 13.2% of revenue from 12.9%, and the CFO was blunt: “SG&A is at 13.2%. This is definitely not where we want to be in the long term.” — Gualberto Hernandez, Chief Financial Officer · 2026-10-27 The 30 basis points split roughly 20 from investment in technology and 10 from a full year of CEO compensation. Add $1.8 million from shutting audiology and the ~10bp of asset-disposal losses, and the aggregate Total SG&A creep is a real feature, not a rounding error. The offsetting evidence is real: ELERA, the point-of-sale replacement, is now live across the English-speaking Caribbean, Guatemala, Costa Rica, and being finished in the Dominican Republic — with Montego Bay the first club to open on it from day one. Faster checkout is a tangible win. But the heavy lifting was always RELEX, not the registers. Meanwhile the capital intensity is rising into the delay: capital expenditure hit $56 million in the June quarter, up 44%, and free cash flow came in at roughly negative $2 million. The balance sheet is fine — effective net cash of $123 million — but the self-funding story is thinner than a year ago.

Colombia's Optical Illusion

Analysts have now asked about Colombian operating margins two quarters running. This quarter's answer was a list:

All the startup costs for Chile of about $4.2 million in the year are reported within the Colombia segment. Not in the Colombia P&L, but the numbers that you're looking at, the Colombia segment include about $4.2 million of Chile expenses.
Gualberto Hernandez, Chief Financial Officer · 2026-10-27

Add a $0.8 million wealth tax, roughly $450-500k of plastic tax, and — most importantly — about $9 million of additional expense allocated to Colombia under transfer-pricing rules. The segment number is therefore not a clean read on the underlying business. But note the contrast with three months ago, when the same question got a different answer: “we have a higher running operating cost in Colombia in general compared to our other markets... This is something that, again, we don't see this as a trend.” — Gualberto Hernandez, Chief Financial Officer · 2026-07-09 Two consecutive quarters of margin decline later, the explanation has lengthened rather than resolved. In July the Chile drag was framed as "about 10 basis points"; “In SG&A, it's about 10 basis points, the hit that we had this quarter for the preopening expenses in Chile.” — Gualberto Hernandez, Chief Financial Officer · 2026-07-09 It is now a $4.2 million annualized item that will persist until Chile generates revenue. That is a fair characterization of a new-market build — and it is also a cost the market will keep paying for several quarters with no offsetting revenue.

What Is Still Working, and What Is Coming

The membership engine is the strongest asset in this story and deserves the emphasis management gave it. Membership income reached $100.8 million, up 17.8%, and 1.7% of revenue. Platinum went from 17.9% to 23.4% of the membership base in a single year — a 550 basis-point mix shift that is pure margin. Renewal rate improved to 90.4% from 88.8%, and member accounts grew 8.7% to almost 2.2 million. That is the durable, fee-based layer that justifies a premium multiple, and it is genuinely accelerating. The growth pipeline is unchanged and credible: Montego Bay opened as the third Jamaican club, four more clubs are in flight to reach 63, plus parking lot expansion and remodels at high-volume locations — cheap, high-return capacity on sites that already work. New distribution centers in Jamaica, the Dominican Republic, and Chile follow. David Price pushed back explicitly on the pace question: “we have to do that in a balanced way... We want to set a sustainable pace” — David Price, Chief Executive Officer · 2026-10-27 — a soft answer, but the cadence of roughly three to four openings a year is being held. The risk stack, though, is unusually well-telegraphed and unusually global. “The scenario we are most focused on is a combination of higher fuel, freight, and food costs. U.S. diesel prices have reached record levels. A very strong El Niño is forecasted through the winter” — David Price, Chief Executive Officer · 2026-10-27, with Panama Canal capacity still constrained. This is not a company-specific worry — it is the same El Niño and High fuel costs complex that has been running through the global keyword tape for several quarters, and management has been flagging fuel since April: “we're seeing there are changes in fuel costs around the globe. And that's something that I think all retailers and all distributors are dealing with.” — David Price, Chief Executive Officer · 2026-04-09 A food-and-fuel cost shock into a value retailer with fixed-price member expectations cuts both ways — it drives trade-down traffic but compresses the margin that this quarter's 15.8% gross print just barely defended. One theme has gone quiet: Trinidad. For several quarters the trapped-cash and dollar-convertibility problem was a headline item in the Q&A. This quarter it merited a paragraph and no questions — $53.8 million of TTD-denominated cash still cannot readily be converted, "challenging" as ever, but no longer the story. That silence is itself informative: the liquidity drag has been absorbed into the base rather than solved. The verdict: PriceSmart delivered an excellent operating year and then asked investors to wait longer for the operational payoff. The membership flywheel is real and the club pipeline is real. But at 37x earnings, with a comp roughly half FX, SG&A structurally higher, capex up 44%, and the one system that unlocks the margin story now undated, the stock's 9% slide is less a tantrum than a re-pricing of patience.