PriceSmart

Scores of people formed long lines outside PriceSmart outlets throughout the country as they looked to stock up on goods for the lockdown. —Photo: Curtis Chase

PRICESMART’S four warehouse club outlets in Trinidad increased their net merchandise sales for the three-month period between March 1 and May 31, 2020 by 16.4 per cent, according to the company’s filing with the US Securities and Exchange Commission (US SEC).

The double-digit increase in sales includes the period from mid-March when scores of people formed long lines outside PriceSmart outlets throughout the country as they looked to stock up on goods for the lockdown.

PriceSmart opened its first warehouse outlet at Invaders Bay in Port of Spain in 2000 and now has outlets in Chaguanas, Mausica and San Fernando.

While the company experienced double-digit sales growth for its most recent three-month reporting period, the growth in its net merchandise sales for the nine-month period from September 1, 2019 to May 31, 2020 was a more modest 6.8 per cent.

In its US SEC filing PriceSmart said: “Net merchandise sales in our Caribbean segment grew 9.6 per cent and 6.2 per cent for the third quarter and the nine months ended May 31, 2020, respectively, when compared to the same periods last year. These increases had a 290 basis point (2.9 per cent) and 190 basis point (1.9 per cent) positive impact on total net merchandise sales growth, respectively.

“Our Dominican Republic, Trinidad, and Jamaica markets led the way in this segment with 21.4 per cent, 16.4 per cent, and 11.8 per cent growth for the thirdquarter ended May 31, 2020, and 17.9 per cent, 6.8 per cent, and 11.5 per cent growth for the nine months ended May 31, 2020, respectively.

“In the Dominican Republic, we opened our fifth club in June 2019, while in Jamaica and Trinidad, strong comparable sales growth was the primary driver of growth for the third quarter and the nine months ended May 31, 2020.”

PriceSmart, which reported net merchandise sales for the group of US$2.4 billion for the nine-month period, has 46 warehouse clubs located in 13 countries in Latin America and the Caribbean. I

Although its warehouse clubs and local distribution centres are located in Latin America and the Caribbean, its corporate headquarters is in San Diego in California, its buying operations and regional distribution centres are located primarily in the United States.

Not enough US dollars

The company complained that it continues to experience a lack of availability of US dollars to purchase merchandise in the Trinidad market. PriceSmart has been complaining about US dollar illiquidity in the local market since 2016.

Of the lack of availability of US dollars in T&T, PriceSmart said: “This can impede our ability to convert local currencies obtained through merchandise sales into US dollars to settle the US dollar liabilities associated with our imported products, or otherwise redeploy in our company, increasing our foreign exchange exposure to any devaluation of the local currency relative to the US dollar.”

According to the company: “We are working with our banks in Trinidad to source tradeable currencies, but until more US dollars become available, this illiquidity condition is likely to continue.

“As of May 31, 2020, our Trinidad subsidiary had Trinidad dollar-denominated cash and cash equivalents and short and long-term investments measured in US dollars of approximately $72.3 million (TT$490 million), an increase of US$47.4 million from August 31, 2019 when these same balances were approximately US$24.9 million.”

In its filing with the US SEC, PriceSmart also indicated it has sought to protect itself somewhat in the event that the TT dollar is devalued against the US dollar. It said: “Illiquidity of the Trinidad dollar could signify that it is overvalued, and the Trinidad government could decide to devalue the currency to improve market liquidity, resulting in a devaluation in the US dollar value of these (TT$490 million) cash and investments balances.

“If, for example, a hypothetical 20 per cent devaluation of the Trinidad dollar were to occur, the value of our Trinidad dollar cash and investments position, measured in US dollars, would decrease by approximately US$14.5 million, with a corresponding decrease in our stockholders’ equity recorded in the accumulated other comprehensive loss caption of our consolidated balance sheet.

“Separate from the Trinidad dollar-denominated cash and investments illiquidity situation described above, as of May 31, 2020, we had a US dollar denominated net monetary asset position of approximately US$11.2 million in Trinidad that would produce a gain from a potential devaluation of Trinidad dollars.

“If, for example, a hypothetical 20 per cent devaluation of the Trinidad dollar occurred, the net effect on other income (expense), net of revaluing these US dollar net monetary assets would be an approximate US$2.2 million gain.

“We are carefully monitoring the situation, which may require us to limit future shipments from the US to Trinidad in line with our ability to exchange Trinidad dollars for tradeable currencies to manage our exposure to any potential devaluation.”

PriceSmart said while it continued to experience US-dollar illiquidity in Trinidad during fiscal year 2020, its Trinidad subsidiary was current on its US dollar payables for imported merchandise as of May 31, 2020.

US dollar loan

Although PriceSmart’s filing with the US SEC does not explicitly say so, a contributor to the fact that it is current on its US dollar payables as at May 31, 2020, is likely to be as a result of the US$12 million, two-year loan it received from Citibank NA on April 17, 2020.

The rate Citibank charged PriceSmart for the loan was 5.63488 per cent above LIBOR, which works out to be about 6.68 per cent, according to Express Business calculations.

According to PriceSmart’s US SEC filing: “The proceeds of this Note shall be used solely to finance trade activities of the borrower in Trinidad and Tobago which activities, and all documentation relating to such activities and trade transactions, are valid and fully enforceable in Trinidad and Tobago, and not to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock. “

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