Monday July 30, 2012
by Paul Goodwin, editor Cabot China & Emerging Markets Report
Everyone loves a bargain, and
PriceSmart (
PSMT) was founded by a man who understands that truism; Sol Price invented the modern warehouse storewith FedMart in 1954 an Price Club in 1976.
It proved to be a popular idea and Wal-Mart founder Sam Walton admits that he copied lots of Price's ideas with the Sam's Club chain. Costco also took the warehouse idea and ran with it, eventually taking over the Price Club chain in 1993.
That left Mr. Price and his son Robert with a good idea and looking for a new place to plant it. And that place turned out to be Panama.
The first PriceSmart store opened in Panama in 1996 and the company cam public on Nasdaq in 1997. Growth was haphazard for a few years, until PriceSmart settled on a strategy centered on Central and South Ameica and the Caribbean.
PriceSmart now has more than a million card holders, who shop at 29 company-owned and operated stores in 12 countries. The stores are smaller than typical US warehouse stores and annual membership fees are lower, averaging $35.
Revenue growth was steady at 12% in 2009 and 2010, but jumped to 23% in 2011 thanks to excellent same-store sales growth. Earnings were 30 cents a share in 2006 and have increased every year since, hitting $2.02 per share in 2011.
PMST is a good defensive pick for these dicey times. it's a known quantity, pays a small dividend, and is being conservatively managed for controlled expansion.
A rally brought the stock up to $83 in April, but the May-June market skid brought it back below $60 again. A breakout above $73 or so could start to produce a short-covering rally that will power the stock through its overhead.
Learn more about this financial newsletter at Paul Goodwin's Cabot China & Emerging Markets Report.Related articles:
