Good day and welcome to the PriceSmart, Inc. and Earnings Release Conference Call for the First Quarter of Fiscal Year 2014, the three-month period ending on November 30, 2013. All participants are currently in a listen-only mode. After remarks from Jose Luis Laparte, PriceSmart's President and Chief Executive Officer, M. John Heffner, PriceSmart's Executive Vice President and Chief Financial Officer, you will be given an opportunity to ask questions as time permits. (Operator Instructions). As a reminder, this conference call is being recorded on Friday, January 10. A digital replay of this call will be available through January 31, 2014 by dialing 888-203-1112 for domestic callers, or 719-457-0820 for international callers. The pass code is 8610355. I would now like to turn the conference over to Mr. John Heffner. Please go ahead, sir.

Thank you, Shannon, and welcome to our earnings call for the first quarter of fiscal year 2014. I hope you will find this to be a useful forum to review the information that we provided in our earnings press release, which included a report on our net warehouse sales through December 2013, and the announcement of a property acquisition in Colombia, and our 10-Q filing which we released yesterday January 9, [2014]. You can find both, the filing as well as the press release on our website www.pricesmart.com. Please note that statements made during this call may contain forward-looking statements concerning the company's anticipated future plans, revenues and related matters. These forward-looking statements include, but are not limited to, statements containing the words expect, believe, will, may, should, estimate and similar expressions. These statements are subject to risks and uncertainties that could cause actual results to differ materially, including the risks detailed in the company's annual report on Form 10-K for the fiscal year ended August 31, 2013 filed with the Securities and Exchange Commission on October 30, 2013. We assume no obligation and expressly disclaim any duty to update any forward-looking statement to reflect the occurrence of events or circumstances which may arise after the date of this call. Now, I will turn this over to Jose Luis Laparte, PriceSmart's President and Chief Executive Officer.

Good morning, everyone, and thank you for joining us in our conference call for the results on the first quarter of fiscal year 2014, so let me first begin with an update on sales for the first quarter. We ended with sales of $589.7 million, resulting in a 12.6% total sales growth versus the first quarter of last year. The growth in transactions was 11.7%, and the average ticket grew 0.08%. Comparable warehouse sales growth for the quarter was 7.9%. If we look at our sales by segment, the Latin America region had sales growth of 14.2%, and in this quarter this year, we have two Cali, Colombia locations and one new location in Costa Rica. A year ago for the same period, we only had one of the Cali locations. The one in the South that was opened for about six weeks of the total period. For the Caribbean, the growth was 9.04% and there was no change in the number of clubs. We continue to experience a stronger double-digit growth in our larger Trinidad market and Aruba also experienced a double-digit growth during Q1. In terms of merchandize categories for the quarter, the food and non-foods areas had cost increases in the low single-digit. Fresh and food service growth were high single-digit and bakery had a double-digit growth. In particular, we saw a strong performance in the candy and seasonal candy categories and also in the toys and different non-foods programs, where we carry a good selection of merchandise for the holiday season. Those areas reported a double-digit growth which is a good indicator of our merchandise differentiation in the markets where we operate. Electronics, sales in particular reported a low single-digit negative growth in this first quarter versus last year due to challenges we saw on T.V.…

Thank you, Jose Luis. You all have the numbers from our release and filing yesterday, so I will not go over them in detail and José Luis has addressed net warehouse sales and some other important items about fiscal first quarter. Let me highlight a few other items in our financial results before we take your questions. Warehouse gross profit margins as a percent of net warehouse sales were 14.5%, a reduction of 54 basis points from Q1 of fiscal year 2013, pretty consistent with our trends. Membership income continues to benefit from the fee increase of June 2012, and to a lesser degree than the platinum membership program contributing 8.5% to the 20.8% year-over-year increase in membership income on 12.1% growth in membership accounts. You will see the impact of that fee decrease become less and less in the next two quarters as we approach the two-year anniversary in June 2014 of the fee increase. Warehouse club operations expense were essentially equal to Q1 of last year 8.8% of net warehouse sales. We had positive leverage of expenses in many of our warehouse clubs, but this was offset by the additional expenses associated with three new warehouse clubs that were in operation for all or a portion of the quarter compared to Q1 of fiscal 2013. On the other hand, general and administrative expenses were 1.9% of sales compared to 2.1% of the net warehouse sales in Q1 last year, a reduction of 23 basis points. Again, G&A expenses are those that are associated with the company's corporate functions and U.S. buying activity. In total, selling, general and administration or SG&A expenses, not including preopening expenses and loss on the disposal of assets improved by about 21 basis points. We had some preopening expenses in quarter related to the…

Thank you, sir. (Operator Instructions) We will take our first question from with Dave King with Roth Capital.

Thanks. Good morning, guys. I guess first off in terms of the decline of warehouse club gross margin this quarter, anything to highlight there? I appreciate all the color you had, Jose Luis, in terms of comps by segment. Is there anything, mix that might have driven that or is it just the kind of consistent thing where you got your lower prices and kind of pass that back to consumers, or is there something else to note. Thank you.

Thank you, Dave. There isn't anything different. It's just a consistency and our policy and focus on lowering margins and obviously try to get that in terms in terms of our volume now, but nothing changed really dramatically in the last quarter.

Okay. So, no widespread price declined or anything like that. It sounds like it's maybe [Merch] margin was driving it. Not necessarily any deleverage or anything like that at this point?

That's fine. Nothing particular at this point we will highlight.

Okay. That's helpful. Then in terms of the December comp, if I remember last year, I think you guys had an outside benefit related to calendar timing and I think those foreclosures, things of that nature. Could that have any effect this December at all and how should we think about that for January itself?

Dave, this is John. No. It didn't have any impact this year. I think it was actually last two years ago, we picked up I think January 1st New Year's day might have fallen into December, in our comp period and therefore when we were comparing last year to the year before - so that was a two-year old problem, but a shift in the calendar, but this year-to-last-year, there was no change in that January 1st. We got following of our January accounts just as it did last year and Christmas obviously, Christmas day which has some closures, both fell into December last year and this year, so there is no change.

Okay. That helps. Then in terms of the comp that we saw, I guess the comps we have been in kind of 6% range. It sounds like that's pretty clean, but some of that you were to choose maybe 100 basis points for the new Costa Rica store cannibalization, but then it sounds like also some of it's just kind of the electronics weakness that you highlighted. Jose Luis, I think you had talked about some initiatives you had planned to kind of re-boost that will get that to reaccelerate. Do you care to add some color around that?

Yes. Well, probably it's been a trend even in the U.S. retailers as far as we know and obviously there was a concern in the market, because for whatever reason and obviously price points are not dropping as dramatically as they are used to drop in the electronic, so there is a need obviously of increasing volume. We are now putting together good plan for World Cup that will affect positively a lot of our sales for this 2014 calendar year that we just started. Hopefully that will help changing the trend particularly in our markets where World Cup of soccer becomes a big event in also in [Rica], Colombia and even some Caribbean markets. It's not as important in the States, but we believe that it will help the change the trend with people getting ready to have a better TV. We now see last four years ago and we also we are looking forward to changing the trend and having a good selection for people to replace the old TVs and get ready for a good World Cup session this year.

Okay. That helps. I like Super Bowl in the U.S., but thanks so much.

I think Jose Luis was suggesting even bigger than the Super Bowl in the U.S.

Even bigger.

I would also - okay. Thanks so much.

Thank you, Dave.

We will take our next question from David Strasser with Janney Capital Markets.

Thank you very much. One, it seems there have been one of the trends if you tend to look at some of the numbers is that, the Caribbean you will doing a little bit better sales growth why maybe it's slowing a little bit in the Latin American side, but is there anything going on? Is it inflation? Is it improvements in merchandizing or something that's just sort of driving some of those changes?

Well, in the Caribbean, I think this year, and particularly for Q1, I think we were better positioned in terms of inventory. We a better planning for that holiday season, which obviously starts and also kicks off with that September and goes the way through December, so I think that has to do with the good results that we saw markets like Trinidad. There is definitely a good recovery of the economy in Aruba. A year ago, or for a couple of years Aruba has had some challenges in their economy. There is a small economy, but definitely saw good comeback from that economy. That's basically the main things driving. We have challenges dealing at Jamaica. Jamaica has been running a pretty significant evaluation as much as 15% compared to a year ago. We thought they had a decent performance, so that's what I would say for the Caribbean market. There isn't anything else to highlight as far as that recovery. Four us in America, I would say that most of the economies are pretty solid, a little bit more challenging Honduras. Right now, they have elections during calendar year 2013 and the government is actually a new government starting January 20th or something like that, this month of January. Every time you have elections, there are some political changes in these countries. There seems to be a slowdown Hopefully nothing would change and we will see things getting back to normal, but that's the only market that I would highlight in Central America that that's more of a challenging or guess, uncertainty right now on Honduras.

I imagine up to some degree maybe the Costa Rican cannibalization, so I know you don't want to talk about it, but I just want to make sure I understood what you said specifically on Costa Rica. You said that you had estimated about 100 basis points and that it's running somewhere around there cannibalization to the overall business.

That is correct. That's our best guess. Obviously, we got all our data that we think that's what we believe it is affecting our numbers in the numbers. Again, since we planned opening up Tres Rios, we knew we needed to get more space to support it, allow more members to park and obviously make their shopping experience better and it is working. As I mentioned, the growth of having both a 40%, which is pretty much following our plans of what we expected.

I wanted to add something, Jose Luis. As time goes on, Dave it is going to be more and more difficult for us to sort of assess what that impact could be, because even the existing members who used to shop at Supporter, maybe shopping more in Tres Rios now it was more convenient for them, so I am not sure a just comparable to do that, so I am not sure we are going to be. We had this issue for a while, I think it's going to reverse even into the next couple of months; we are going to our comp this next month of January we start comping our first club in Cali will going into our comp calculations in January. While since we started opening that one, we opened another one in Cali, and that took some sales from that one, so we are going to see some level of cannibalization of that now. That club is not nearly as big as Supporter in terms of impact, but it's going to have some impact. Then again from day when we opened the second club in Tegucigalpa, that's been taking some sales from our existing club to use, so comps will have its impact for us for some time, so we are focused really more on the top line total sales growth.

I understand. It makes perfect sense. I mean, it seems the absolutely right thing to do there. One last question regarding Columbia, as you open this next club and as you kind of continue to grow sales there, are you still getting significant opportunities from leverage on both, gross margin and SG&A from sort of the infrastructure there and how significant can that be or I guess maybe another way to put it is there, as you open the next club and continue to move forward is there more spending that you need to do there or do you have an infrastructure in place for a couple of more clubs?

We definitely believe we have the infrastructure to support that growth. It is actually getting better now as we open number four and hopefully five, six, whenever they are opened, it will help deliver us a expense portion.

Okay. Great. Thank you very much.

Thank you.

Next we will go to John Jon Braatz with Kansas City Capital.

Good morning, everyone. John, Jose, can you give me a little bit more data on your insight into I hope Pereira. Compared to Cali and Barranquilla it's still a lot smaller city. Is there any demographic data? Is it income levels are same as those cities. When you think about the size of the city about 600,000 pass through on the metropolitan area is larger, but is that sort of the limit that you want to go in terms of size of the city on the 600,000 population level to go below there.

Yes. Let me tell you, Jon, our plan has been, I guess, since the very beginning we started installing obviously the main [Bogota, Medellin] and we started ranking the cities by size of population. We also used a different system of ranking them based on demographics. We try to look at out of those households Colombia fortunately is a very organized in terms of the demographics. You get them [by] a number of sign depending on the neighborhood, so we got good data that probably show us the potential in each of the cities. The 600,000 number is probably pretty close. It can be even below that program and we can make a successful club out of those series. One thing to highlight of Pereira it is a city that becomes a commercial. It's on the coffee region, which obviously becomes everybody knows how important is coffee for Columbians and how big they are exporting and doing things with coffee. One thing to highlight as I mentioned it Pereira becomes a commercial center Atlantic to highlight definitions they'd become a commercial Center for (Inaudible) two cities that are relatively smaller, but we depend on Pereira a lot of as far as consumption, so we believe that this club in Pereira will be able to serve the needs of, what we only call only Pereira, but the region of that coffee area, so it's definitely kind of our direction and it's a small nice city in the western part of Colombia.

I saw that was only about 100 miles from Cali. Do you have any members of Cali stores that live in Pereira?

Yes. Actually we have the members already from Pereira that shop at Cali. I guess that's what you meant? Yes. We do have some members that are already shopping in Pereira. It happens with Barranquilla with the other locations. It is a nice - for the timing of (Inaudible) done it in the past and it's pretty nice drive from one city to the other.

Okay. Then one last question. You had mentioned Barranquilla was in your top five stores. Can Barranquilla supports these stores?

Looking at some of those numbers, we definitely have our great location right on the north of Barranquilla and we are trying to analyze some of those numbers to see if there is a need or an opportunity, I guess, to help obviously grow moving in the Barranquilla area. I guess that the answer is probably and one - looking at those opportunities.

Okay. Thank you very much.

Thank you, Jon.

Next we go to [Leslie Hardy], Private Investor.

How is it going guys?

Fine. Thank you.

You guys spoke a little bit about currency risk and as you expand into new countries or more inside of the countries that you are already in, how do you plan on take earnings from situation like Venezuela, this quarter, so Colombia and also do you foresee any problem with cross currency leverage? In other words, that involve cross-currency transactions that could cause an issues for PriceSmart.

Well, thank you for your question. The company is subject to currency movements and loss and we get for the positive or negative impact as currencies move. Mostly that's outside the direct control of the company, but we can and we have taken actions to design to reduce our exposure to movements in currencies in certain markets with things like the local currency, bank loans, we do, do some hedging transactions, particularly in Colombia and we take some pricing actions on the U.S. merchandize, so we have a series of things that we do within the company that we have been operating with for quite some time and here we can do what we can to manage our currency risk although currencies will move and are not completely are under our control.

Completely understood, I guess my question is, are those actions that you decided, are those actions increasing as to the proportion that you increase your presence in those countries. It's as clear.

I think so, and yes, I think the activity that we are doing in this area is increasing as our business increases, so I think it's proportionate to our business growth. These types of things sort of follow along with that and we take those actions.

Okay. Thank you very much, guys.

Next, we will go to (Inaudible) Research & Management.

My question haven't been in Colombia for a while and things are going well, expanding well. Can you tell us a little about the competitive situation there? Who do you find yourself banging your heads against and that sort of thing and is it both of them which you encountered in Central America, the Caribbean?

Yes, [Ross]. I will say that Colombia especially probably one of the countries where we operate have more competition, very formalized, very formal competition now. Obviously there are two big retailers in terms of supermarkets or hypermarkets, which is owned by casino that French group and very strong competitor, very strong retailer with a lot of hypermarket, supermarket different formats of operations. In addition, we have what used to be (Inaudible) Chilean company and they probably have at least 90 to 95 stores and hypermarket format, so those are the kind of the two big players. In addition, you have some local regional players like those in the area of Cali and that area of the country. You have in the North and also we are present in the lot of places (Inaudible). We have a department stores presence with Guatemala which is based on the department store owned by the Chilean group. You have the home centers which are the Home Depot-style stores, also with a lot of presence more than probably 35 to 40 stores in the whole country. We have Costco, which is kind of a highway between club and the hypermarket, but with no membership, which operates like between Bogota and other cities in the country. We already compete with them in Cali. I will say that Colombia has variety of retailers, some category retailers (Inaudible) also, so there is a good competition. What we have found since we first did the analysis of Columbia was that there was a niche for clubs. There was a desire for people to buy imported goods, good quality merchandize, like the one we carry at the more reasonable price. I think that Columbian market was creating pretty comfort retailers want to want a little bit comfortable level of charging higher margins. I think we came up with a good strategy with our low prices and low quality merchandize that's been affected. I forgot to mention, there are still some macro and other retailer that kind of competes of the mom-and-pop deliveries and mom-and-pop service, so there is a quite a good complete in Colombia. I would say as I said at the beginning that is probably the most competitive marketplace where we base business upon variety of retailers and a very solid retail competition, which is good thing. It's also makes everyone be on their feet and make it a good competition.

(Operator Instructions) We will take our next question from West Whittaker with Carmel Capital Management.

Hi. John and Jose Luis. Historically, have you found your markets have a fairly close correlation with U.S. market growth for consumption patterns with maybe a one or two quarter lag or are you finding that the consumption patterns are becoming less correlated?

I am not sure I have an opinion on that. I think we saw that a couple of years ago and the retail market took a real dip here. Looked like we lagged about six months, so I think we could sort of point to that. I don't know if that was a real trend or just what we saw at the time, but then.

Yes. I would say that some specific markets get more of an influence when things gets low into states, but we noticed back in the 2008-2009 year. It took a little bit more of time for us to get the impact what we saw obviously remittance money when the things are not going well here, there's not that much money flowing into some of the concrete effects Jamaica [affects] El Salvador. It affects Honduras, Guatemala. Those are the countries get more affected by and then to some degree, Colombia, but other than that I think that the good thing is we believe our countries are more and more independent more independent. They keep growing. They all depend on a lot of the consumption to some degree of the states also predict that not only with the remittance, but also production of some things that exports, so obviously (Inaudible) are in the area of Honduras and in El Salvador. Four years ago, five years ago, they got hit because of reduction of inventories and just reduction of consumption in the state, so there is a factor that definitely affects. The last one would be (Inaudible) back in the 2008-2009, a lot of people didn't go to Costa Rica to buy some of those of those vacation places has got a little bit affected also by that, so I think we will always have a kind of a connection with the U.S. economy. They kind of find the new way around with their own economies, but there will be always probably some kind of an influence. I hope that answers your question, West.

It does.

Thank you.

Next we go to Ronald Bookbinder with Benchmark Company. Please go ahead.

Thank you for taking my question. The Bogotá Internet sales, are they really of any size to speak of? Would you be able to identify how much they are helping Barranquilla being in top-five store for you guys?

It's kind of a nice experiment. If they are not significantly impacting definitely Cali sales, I think was a good start to get the members from Bogota. We got that, we noticed that when members were going to Barranquilla, especially Barranquilla, when they were going on vacation to (Inaudible) which are vacation places. They used to make a trip to Barranquilla to shop and a lot of those members were coming from Bogota and they were shopping in Barranquilla, where we already have our delivery service actually, so that's the case of the Idea of payroll what if we get closer to those guys that and only shop at PriceSmart when they go on vacation for a week to Barranquilla or that area, so we said let's get it a little close, so what they can do is get online with their membership and they can buy some of the basic consumables. Obviously it does help a little bit in consumables. It's a little bit harder to sell. I think that effect of having a member walking in a club shopping in a brick-and-mortar and finding items that they are not looking for. It's very hard to get dialing through internet. We are doing our best and we think it's a good effort for the keep them with their membership active and shopping a few item hereunder, but as I mentioned my script we believe that way we are going, we probably one day we will get an club opened in Bogota and there will be shopping right there. That is just kind of convenient thing for some of their members to be able to shopping around with us in the meantime.

Okay. In the past, you had talked about that it was difficult to acquire locations in Colombia and that you might have to move more towards a avouching model, but we just announced another land acquisition. You sound like you are very positive on more locations. Hopefully, in Bogota as you were just talking about, so have you seen a change or are you attacking the market differently to acquire locations?

No. I mean, nothing has changed. It's still as challenging. I guess, we are moving forward with working on permitting for locations for four locations both (Inaudible) and Bogotá, and hopefully we will be able to announce soon the completion of some of those efforts, but nothing has changed. It's still a as challenging. I think we know our way better enough - two-a-half years or almost three years of working on that market that he's we even since before we opened Barranquilla, I think we know more people, we know more developers, we know more of the city, so there is some knowledge obviously now that we have acquired through these five years that is making - even this year it's not that much easier. It's making things move probably little better, so we feel pretty positive, Ronald, and obviously Pereira took also some time to get it completed, so permit and processing in all these countries. It's quite challenging probably not different than in the states with the growth of the cities and Chinese export making that that is to make sure that you offer the right parking that won't affect traffic all the things and you have to go through in terms of turning things. We keep making progress and we are still optimistic.

Okay. Lastly, John, you talked about the inventory being up at the end of the quarter, being better positioned for the holiday in December. Did you see that come down in line with plan? Can you give us a little color as to that high end inventory after the holiday?

Yes. We sold a lot of it in December, so we are on target with our plans for inventory and we can really be I think in pretty good shape as we come into January. With the merchandize that we have, so we are pleased with where we stand right now.

Okay. Great. Thank you very much.

Thank you, Ronald.

Next we go to Stan Trilling with Credit Suisse.

Thank you. Just two quick questions. Long-term by long-term over the next two to three years, what do you see as the potential number of units you could have all things being equal and how many you honestly think you could have in Colombia.

Okay. I guess, probably delivering on our number, but we don't have a specific number in mind. Given the size of the Colombia market will be little up in multiple warehouse clubs in this country. We can secure the right size and as we continue to experience the success we had been so far. Now, that's pretty much as much as we can say. With the size of the market bet that for America and Panama all together, so I guess it's a matter of making the math of close to 45 million people, the population of Columbia and get the opportunities in the right-size.

Okay. Are there any other countries that have the demographic in South America that have similar demographics that you would consider expanding to in South America?

Well, I guess, demographic I will add lots of those. I guess, (Inaudible) will be expanding in all of them. I mean, just we know that the route it has got some similar demographics. They are not as big as Colombia. Chile has some of that structure. Obviously, Brazil, there is a big concern and different language. I am not suggesting we will even go there, but there might be some other countries with opportunities. Not for sure Peru and Chile can be one of those countries with kind of similar structure and opportunity of this.

Are those more like three, four and five years out-type of thinking?

I can't answer that. We don't really have a timeline for. I am suggesting, we will be opening very soon. I guess it's just the answering your question that the (Inaudible) or no, we don't know if we will definitely go there, but the potential can be there for sure.

Okay. Thank you very much and congratulations on doing a phenomenal job over a significant period of time and I am proud to be an owner.

Thank you.

Next we go to Dave King with Roth Capital.

Thanks, guys. Just a quick follow-up. John, in your response to another question you touched on Cali into the moving the [current base] of January and how the second Cali store will obviously be cannibalizing that a bit and obviously that makes sense and I get it. I guess, what I was curious about is, how Cali, I guess that it's not performing as well as Barranquilla for all the reasons you talked about in the past in terms of what drove the strength at Barranquilla, but I am curious is Cali still performing on a comp? And when I say Cali in the first store, is that performing better than your new company average. I would assume it would just because of where it's at in its lifecycle, but any color there would be appreciated.

Well, we don't provide individual comp information on individual warehouse clubs, so I really can't comment on that, but I would say overall. As Jose Luis mentioned in his opening comments, Barranquilla was a substantial level of sales and Cali and I wouldn't tell you they are not performing as well, their sales are not as high as Barranquilla, but we are very pleased with the performance of the clubs we have in Cali.

Okay. That helps. Thank you.

Thank you, Dave.

At this time, there are no further questions in the queue. I would like to turn the conference back over to Mr. John Heffner for any closing remarks.

Well, thank you, Shannon. I would like to thank everyone on the call for participating with us today. Thank you.

That does conclude today's conference. We do thank you for your participation. You may now disconnect.