Good day, and welcome to PriceSmart Inc.'s earnings release conference call for the third quarter of fiscal year 2016, the 3-month period ending on May 31, 2016. [Operator Instructions] After remarks from John Luis Laparte, PriceSmart's President and Chief Executive Officer, and 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, July 8, 2016. A digital replay of this call will be available through July 31, 2016, by dialing 1 (888) 203-1112 for domestic callers or (719) 457-0820 for international callers. The passcode is 2945542. I would now like to turn the conference over to John Heffner. Please go ahead, sir.

Thank you, and welcome to our earnings call for the third quarter of fiscal year 2016. We'll be discussing the information that we provided in our earnings press release which we released yesterday, July 7, 2016, along with our 10-Q. The earnings release also included information about our net warehouse and comp sales for June. You can find both the press release and the 10-Q filing 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, 2015, filed with the Securities and Exchange Commission on October 29, 2015. We assume no obligation and expressly disclaim any duty to update any forward-looking statements to reflect the occurrence of events or circumstances which may arise after the date of this call. Now I'll turn this over to Jose Luis Laparte, PriceSmart's President and Chief Executive Officer.

Good morning, everyone, and thank you for joining us today. I will be -- begin my remarks focused on our third quarter results and will follow that with some comments about June sales, which was also included in our press release and then some additional comments about our significant activities happening in PriceSmart. For the third quarter of fiscal year 2016, we reported net income of $16.8 million or $0.55 per share. This compares to $21.2 million or $0.70 per share for the third quarter of fiscal year 2015, a reduction of $0.15 per share. The reduction in earnings from the year-ago period is related to: number one, a larger year-on-year loss in Colombia of $1.5 million, equivalent to $0.05 per share; and number two, less net income generated from our non-Colombia operations in the period compared to the third quarter of last year, on a 57-basis-points reduction in gross margin as a percentage of net warehouse sales and up 1.4% sales growth. Starting with Colombia. As we have been experiencing for the past few quarters, the strong dollar versus the Colombian peso continues to have a measurably negative effect on our business. The average exchange rate during the month -- the most recent quarter was COP 3,035 to the dollar. For the same period a year ago, that rate was COP 2,503, a difference of 21.3%. This impacts our reported U.S. dollars results from -- of our business in Colombia, when consolidated into our overall financial. It also causes the price of imported products to increase with a corresponding reduction in the demand for those products in the market. Reported U.S. dollar sales for Colombia declined 20.7% in the current quarter compared to a year ago. When measured in pesos, the sales decline was less at a negative 3.8%,…

Thank you, Jose Luis. Let me briefly touch on a few additional items with respect to our financial results for the third quarter. Consolidated warehouse operations expenses grew 3.3% from the year-earlier period. The expenses in this quarter included 2 -- the expense associated with 2 additional warehouse clubs in the cost base. The translation of the Colombian peso to the U.S. dollar, however, had a positive overall effect. Net warehouse sales grew 1.4%, and as a result, warehouse operations expense increased 17 basis points as a percent of sales. The expenses associated with the company's general and administrative activities increased 30 basis points as a percent of sales when compared to the year-earlier period, largely related to costs associated with our buying and information technology departments as well as the ongoing recognition of higher deferred compensation expense for stock awards granted in the first fiscal quarter of this year. Foreign exchange transactions and revaluation of monetary assets and liabilities resulted in a net $220,000 currency loss in the quarter compared to a $311,000 loss last year. We have seen some recent increased volatility and devaluations in exchange rates in several countries other than Colombia, countries like Honduras, Trinidad, Dominican Republic and most recently, Costa Rica. The effective tax rate for the period of 35.2% compared to 33.7% last year at this time largely due to the higher loss we recognized in Colombia. The company ended the quarter with a cash position of $202.6 million, an increase of $45.5 million since the beginning of the fiscal year. Net cash generated from operations was $112 million, with improved working capital contributing $13 million. Investing activity during the first 9 months of $51.9 million included the completion of the warehouse club in Managua which we opened in November and the construction activity for the Chia Colombian club, which is nearing completion. In addition, there was spending for maintenance CapEx and some larger expansion projects like Barranquilla. From a financing perspective, the only item of significance is a semiannual dividend which we paid in February, which used $10.6 million. With that, Jose Luis and I would be happy to take your questions. Amy, do I turn things over to you at this point?

Yes, sir. [Operator Instructions] Your first question is from Dave King with Roth Capital Partners.

I guess, first off, in terms of the warehouse club margin decline in the quarter. Can you talk about the components there? And obviously, Colombia was down, I think, 154 basis points or so, but you also then have inventory markdowns, higher per-unit distribution costs. Are you able to quantify the reduced in cap activity at all? And then, of the 154 decline in Colombia, did those things weigh there as well? I would assume some of them did. So some more color there, I think, would be helpful.

Yes, Dave. I can tell you that definitely, a big component was warehouse and the markdowns that we had. Obviously, we were expecting a stronger spring sales and those didn't happen. I know that we have to get rid of some inventory, parts in Colombia definitely, and the rest obviously in other countries, where we found some softness. So I will say that the biggest component was definitely the markdowns. Our performance -- we went a little bit more aggressive on our general projections and that definitely affected. I wouldn't say that the other component of end cap of vendor support was as important. I would probably put more weight, definitely to the fact that we did have important markdowns and that's a correction that I think we made already for all the inventory. I think we have clean inventories, as I mentioned a few minutes ago, entering to the last quarter of this year. And we should see -- we shouldn't see that affecting those going forward. I think we are in a good position now and definitely will create some good values for the members out there, but the respective impact that it has in our sales or our profits actually for this third quarter.

Okay, that's good color then, so. And then if I didn't think about that, I think when we talked last quarter on Colombia, the thought was, I think at that point, Colombia warehouse margins were down like 130-something basis points. And then now obviously, that decline accelerated a bit this period. I guess, and then Jose Luis, you commented today that you're expecting to kind of hit your goals. I guess, how should we thinking about warehouse club gross margins going forward, given last quarter, I think that you said that you would expect that the, that degradation might abate. Is that -- been now the new assumption from here, assuming that the inventories are cleaner? I guess, just some context, I think, would be helpful.

Yes, definitely. We will have good improvements. Even with Colombia, in fact, assuming the currency helps us as it's been pretty much consistently at an average of COP 3,000, I think we will be able to sustain a lot of our margins and obviously, without the need of increasing prices, no? We have -- during Q3, we have definitely more activity and price changes, especially in Colombia also because currency was still moving and it didn't help. I think as we continue with this quarter, there's no reason why we shouldn't adjust -- accomplish our margin goals. And hopefully, we don't have to raise any more prices, no? Especially in the Colombian market, I think the currency is getting more stable and that hopefully will help, obviously how we price our imports. In the meantime, we are continuing our process which also helps margin, let me, I guess talk a little bit about local items that definitely, the conversion of some items that we have had during the past year obviously helps lowering prices of merchandise and getting members of the good values that eventually will help in our sales and margin goals, no? It's a combination of things -- that sales of imports, we need them to recover faster so that we can see increase on our merchandise sales on imported items. As I mentioned, we had a decrease of 16% and then local merchants have a decrease -- have an increase of 13%. We want to continue with that increase on local merchandise. But hopefully, with the currency more stable, we will see also an increase on U.S. goods, as members probably get used to those new currency rates.

Okay. Actually, that brings up a, sort of another question along those lines. As you think about having more goods locally sourced, what's the overall sort of margin trade-off? Or how should we think about that in terms of -- I mean, obviously, it sounds like that would be good in terms of import costs not weighing as much, in terms of having to reprice. But then obviously, you have the lower cost for -- or excuse me, the higher cost per unit on the distribution weighing. Is there a good way to sort of think about those 2 drivers -- offsetting drivers? I mean, is it generally still positive, I would assume, to have more locally sourced goods?

Yes. The locally sourced goods, I'll give you a good example of something that, it's kind of a clear example of items that make sense to convert to local. We recently changed some of our towels -- were being brought from outside Colombia. We found a vendor that is actually doing the same towel, to our specs, in Colombia. But we were able to lower the price of those towels. So we are definitely offering a better value to the member. The quality -- as good as the quality we were bringing from the program that we were bringing outside Colombia. But obviously, we have the opportunity to get more sales because we lowered the price of that, and definitely even without sacrificing margin, because in the past, what we have been doing is we had a lot of these imports, we have been lowering the margins in an effort to push the sales and obviously, help the currency challenges in the country. So the combination, doing this right, and little by little we have been successful in converting some of the items. And I'm giving you a real story of something that we have seen with items that as soon as we convert them to local, we'd lower the price because we have a better value. We obviously keep our specs because we don't want to sacrifice our specs on any item that we sell in the clubs. We're not going after lowering prices by reducing quality. We are staying with the same quality; we are staying with our club concept. A lot of these items happened to be actually under our private brand. So by doing all those things, Dave, we try to keep increasing our sales and improving our margins, because we have the opportunity to still offer a good value to the members at a lowered price, no? That's kind of -- the things that are going on in terms of the combination of local versus U.S. and how we kind of handled the margins and sales that we're trying to drive.

Okay. That's good. That's great color. Then switching gears a bit on memberships. Looks like the growth decelerated further this quarter. But you talked about continued new member sign-ups in Colombia. How does the growth rate there been -- what's the growth rate there been doing? And then, it seems like the -- you said, I think, and I think it was in the Q as well, that you had improving renewal rates in Colombia. Does that then mean that the renewal rates subsided a bit in some of the other markets? I guess just some of the drivers around memberships and renewals and growth would be helpful.

Membership in total in Colombia actually is -- it stayed pretty even during the quarter. The new members that we signed up, Dave, in the quarter sort of offset some of the renewals we did not get in the period. So our -- we are somewhat flat with our membership in Colombia. The growth that we got in total for the company really came in the non-Colombia areas. We have seen some improvement in the membership renewal rate. It's ticked up a little bit in the last couple of months, but it's still nowhere we're happy with or where we think it should be, relative to the high 80s we're seeing in the other countries.

And I would only add something, Dave. I will say that for -- particularly for Colombia, obviously, the -- it's a good sign that we have new member sign-ups. But definitely, as I mentioned in my comments, our next important activities to make sure that we keep retaining those members that we are signing up, and we're doing that through the values. And we definitely recognize that we have to do a better job on showing the values. We know the values are there, but we have to do a special effort in Colombia in making sure that all our members appreciate those values. The opening of Chia hopefully will also help, because we are looking at some members, especially in the Bogota market that are in the north of the city, that the distance of the traffic make it harder for them to shop. And we want to make sure that those members hopefully have a warehouse that probably will be a little closer, and we should see some renewals particularly in that market, which is our biggest base out of Bogota -- out of Colombia, the Bogota market. So there are a lot of things going on at the same time that we see as a good indication that we hope to see improvements in our renewals rate little by little in each quarter.

Our next question is from Ronald Bookbinder of Coker Palmer.

What was the traffic versus ticket, sort of the breakout of the comp?

I have that here. In the -- for the quarter?

Yes.

Yes. The traffic for the quarter was up 4.4% and the average ticket was down about 2%, almost 3%.

Okay. So you're still sort of gaining market share when it comes to traffic. And it's really -- just is the impact of the currency that's driving the lower ticket prices as prices increase on the imported goods, correct?

Yes. That's in total, and obviously, the currency impacts that Colombia is -- some portion of that, but we've seen some devaluations in the quarter in some other areas, DR, Trinidad. But our transactions overall are up. And the -- essentially, most of our markets, if not all of them, is down in Colombia. Our transactions are down, but that sort of tracks with the P&L being a little bit down.

And the markdowns. You ended the quarter with inventory down 7.5% so you ended with pretty tight inventories. Can you tell us what specifically or what general category most of these markdowns came in?

The biggest component was coming out of hard lines. Definitely, that was the area where we have higher markdowns applied during that -- the third quarter. More than the hard goods.

That's primarily the U.S. imported goods?

Yes, definitely. Probably I would say 95% of that component is U.S. goods, definitely.

Which are the things you plan further in advance.

That's correct, yes, things that we definitely go back and bought maybe a year ago, in some cases. So I think we have a more cautious plan right now with the purchases, and again, we feel good about the level of inventory that we have in the warehouse clubs right now.

What sort of comp do you guys need to leverage SG&A? Is it about a 2% comp?

I don't know why -- I think our approach is always to try and figure how we can leverage SG&A. And I think certainly a -- over a period of time, I mean, the time period certainly has an impact on that. Our ability to leverage in a very short window is somewhat limited over a longer window. It is -- we have a greater ability to do that. I can tell you the focus throughout our operations is to focus on leverage and doing things better, both through our distribution operations and the way that we buy, and obviously, within the 4 walls of a warehouse club, the -- that's where operations is -- puts a lot of their efforts. I don't have an exact number, but I think is still -- it is somewhat time phase a little bit as to where -- how we can leverage those expenses over time. But I think, over time, we should be able to leverage expenses essentially under any scenario, given enough time.

Okay. And with oil sort of stabilizing as of late in the $45 to $50 range, do you think that could help Colombia get back to a positive comp, and Trinidad, also?

I'm not sure I got the question.

What was the reference of [indiscernible]?

With oil...

Ah, oil? Okay. I couldn't follow that.

[indiscernible] around $45 to $50 a barrel. Is that good enough? And as long as it's stable that these petrocurrencies, the Colombias and the Trinidads, would that be enough to help get you back to a positive comp in those areas?

I will say, obviously without trying to predict oil or currencies, I would say that at least, speaking first for Colombia, I think that a lot of things have adjusted already. Well, at least we hope that, that adjustment was already digested in the market. We have seen pretty steady currency for the last few weeks. There are other indicators in the country that put the country in a good perspective going back to growth, security improving. A lot of good things happening at the same time, that hopefully, we will be part of that comeback, to call it that way, that we will like to see in the Colombia market. For Trinidad, there was an impact definitely for oil and gas prices. But I think during Q3, I will say that the one that affected us probably a little bit more was the VAT. When you start moving items that were paying 0 VAT to the 12.5%, we saw consumption in a lot of items basically being lowered. So it was something difficult to digest. As I mentioned in my comments, we came from a Q1, growing 8% and Q2 growing 4%, to basically negative growth in Trinidad just for that quarter. So the impact was probably more driven by the VAT increases.

Okay, just if I can add to that, I think to your point about oil, Ron, I mean, really the government policy reaction to the price of oil, I think that really drove more of the -- what we saw. So I think government policy by adding VAT to increase the government -- flows of revenues into the government as a result of the lower oil, how that will play out over time, I guess, I don't know. I -- We have looked at places where that happened to us before. I think a couple of years ago in Jamaica, we saw a similar sort of thing where VAT was added to a number of products that didn't have VAT and some changes in that. And what we saw is it took, oh, close to a year, I think, to sort of work through the system in terms of people adjusting to those prices. So I would expect that Trinidad could be a difficult place for a while longer and really related to, I think, the government policy more than the price of oil, specifically.

Our next question is from Jon Braatz from Kansas City Capital.

Going back to Colombia. As we look ahead into 2017, the currency could be flattish year-over-year and maybe even a little bit of a tailwind possibly. But I guess my question is, is it possible in that type of environment to see margins in Colombia improve year-over-year? Or do we need -- or do we just simply need additional sales growth in volumes in Colombia?

We believe, obviously, there the currency will help us, as you mentioned, to get some of the improvements that we need in the margin. I think the conversion of local items is also helping us. I will also say that our position as we keep growing, obviously, with 6 clubs now, close to 7 in a few months, should also help us to be in a better position of even buying better on the local merchandise. So I think there are different components, Jon, that we see making part of that and should help us grow. And definitely, as -- if we see the currency stabilize, we should see sales improve. Now I think our hope continues to be that members are getting used to the exchange rate. It took longer than we expected. Realities are Colombia went through a huge devaluation when you put it in perspective from COP 1,900 to the COP 3,000 that is now. It was -- and we hit points of COP 3,400. So there was a lot of confusion in that market specifically with the currency moving all the way. So even our pricing has been difficult to keep in that market. So there are a lot of components and a lot of moving pieces, Jon, to get that. But we believe that we can stabilize, obviously, the gross margins, little by little.

Okay. Jose, in your prepared comments, you talked about a little bit of weakness in what are 2 of your biggest markets, Costa Rica and Panama. What are you seeing there in terms of the economy? And what may be behind that little -- that weakness?

Yes. Well, Panama has been, obviously, growing tremendously in the past few years with the expansion of the Canal. I think Panama, the way we do this they were going at -- I think someone made the reference once that they were going 180 miles per hour and they're now going a little bit slower. So we definitely continue to see growth, a lot of investment going on in Panama, a lot of positive things happening. But definitely there is slowdown. We still feel pretty optimist about Panama as a market. Definitely, we open -- we just anniversaried the opening of our warehouse that would be very good for us. A year ago, we opened Costa Verde, and we just anniversaried that one. That should help us in a few months with our comps that were affected, actually, in 2 of our locations over there. And also the new location will start comping, we believe, positively also. So I think there are components in the Panama economy that is, obviously, dollarized that should be helping us going forward or at least not taking such a bad hit. So obviously, it may slow down a little bit, I will have to say, Jon. I don't think it will continue growing at the same pace it was growing. But I think it's still pretty strong. And Costa Rica is in a similar condition. Costa Rica went through some challenges the last quarter. But they have indications that currency, obviously, also got a little affected, not much, I believe, not as drastic, but they went back to a currency of about 550, if I recall, when they were already in 535, 540. So they had a little bit of a currency devaluation also in Costa Rica. I don't think, to that degree, that it will affect spending as much. So it's probably just a manner of things adapting in that market. They keep relatively good growth in terms of, I guess, tourism is still a big component for them. So we were still more optimist about Costa Rica in general in terms of it still an important market for us. And there are good signs in those 2 markets, I will say, Jon, also. Renewals are good, which is a good sign. We feel good about our value proposition. Those are markets where we have good competitors. But we definitely feel good about the things that we bring to those 2 markets and just the combination of those big components of our sales as a percentage.

Okay. All right. One last question. I know it might be a little bit early, but are you taking memberships yet for Chia?

Yes, we started about 2 or 3 weeks ago, and we already have a trailer outside our parking lot. And we're actually seeing decent traffic for a beginning. So I think it's going to get stronger as we get closer to the opening day, which we believe we're still thinking about first week of September, if not earlier. So we think it's going to be a good warehouse club, and we obviously are treating that one -- that one will open with obviously the new exchange rate, whatever that is. And hopefully, the members that are -- we have been hearing good comments about being in that parts of the city, not only for the Chia municipality, more importantly, to some degree, the level of people that can probably access that location from the north of Bogota, no?

Okay, good. Have you yet -- have you been able to discern whether some of the new members were members at the Bogota club?

Some of the new members? We're actually capturing renewals there. So yes, there were definitely members of the Bogota club. I'm sure we're going to start to see naturally more -- many more renewing in that location. Our data, we have -- our database indicates that we definitely have that members that were members either at that one or maybe some even in Barranquilla because remember some of the history for Colombia. We have -- even before opening in Bogota, we have good amounts of members that were shopping in Barranquilla when they were basically -- so we see a second point in Colombia will definitely give us the ability to recapture and go back to get those members that we probably lost because of the distance on a big city.

Our next question is from Thomas Vester of LGM.

We saw in news yesterday you had a robbery in Mausica in Trinidad. I mean, we've never seen that before. I mean, of course, we hope that all of the staff is well and nobody were injured. It didn't indicate in the article. But can you just tell me if this is something that's happening regularly and if you insured for it or how is it?

Well, that definitely doesn't happen regularly at all. I mean, those incidents happen, fortunately, not very often at all and we didn't have anyone injured and definitely we have insurance for that. So, it was a very unique condition.

I think it has happened in the past.

It has happened. Yes.

But it's rare.

But it's very rare.

Given number of procedures associated with how we do closing and things like that. We take, obviously, very lot of care associated with it, but this was an interesting one that, I think, is under investigation.

Yes.

Okay, good. Good to know in that end everyone is well. Maybe just going back to Colombia. I mean, when looking at Éxito and Cencosud, where we have populist figures only for Q1, I mean, they have really post significantly better things post sales in local currency, I mean, pretty high single digits, 7%, 8%. We don't have the Q2 yet obviously. Maybe there's some base effect because it was slightly depressed especially Éxito alluded to that in the more high-end format that they felt that you took something away from them in Bogota with the opening. But they are -- I mean, we understand a lot of the problems. But I guess that's one of the things that probably would raise some concerns that they are comping at better rates in local currency really. Again we don't know the Q2. But is that something you're feeling, especially someone like Éxito has been explaining at least once that they are trying to look at your offering and simply just be aggressive in some of the things that you bring in and bring in at even better prices to really to fight on your turf?

Yes. I will say, Thomas, because -- yes, I actually have been waiting for Q2 results from Mexico in particularly because I noticed the Q1 results and they have definite single-digit growth. One disadvantage we have is the component of important merchandise hasn't been growing yet for us. And obviously, as much as we're seeing growth in the locally sourced merchandise, I reported, I think, about 13% what I reported on local growth. We still have a decrease on the imported merchandise that is not -- we're not getting the sales increase that we needed in that part of our merchandise. So that is not helping. We get -- we really need to get -- that's our next goal, for sure, to get local currency growth with the combination of local and important merchandise. And we -- obviously, our component of imports being much higher than either Cencosud or Éxito puts us in a much more challenging condition to get that growth. But yes, we keep an eye on those figures. And I can tell you that's our #1 goal right now for Colombia is to get that local currency because we can't control the U.S. currency or the currency exchange. So the only thing we can control is trying to get the members in local merchandise and everybody thinking in pesos and get those sales in local currency to be positive. That's our goal for the -- definitely for Q4, and we're keeping an eye on that number every single day, Thomas.

Okay, good to know. But then also, Jose Luis, I mean, you're underway with a seventh club. And I mean, it is a big -- it is a very, very big and what can I say, strategic move for you to go into Colombia and you have invested a lot of capital and a lot of time. I mean, we clearly appreciate that the timing was just very unlucky and nobody could have forecasted that, at least, we couldn't and you couldn't. And but I mean, there must be a part of you that ask a little bit if this was the right move and if it's the right plan to continue to ramp up in Colombia and want to stay and build 7 clubs and then give you the couple of years? And can you just share a little bit the moods and your thinking and also the mood in the boardroom? Because it is clearly -- it's hard to separate these factors. But clearly, it would be problematic for PriceSmart long term if it proved, for some reason, the club concept won't work in Colombia.

Yes. I would say that the -- how do I start answer? First of all, I would say that it is a concern definitely. The timing couldn't be, I mean, worse definitely with all the things going on in Colombia in terms of the currency and all this. Obviously, you may need oil or whatever causes the currency to move. Obviously, the timing didn't help a concept like ours. I think in terms of proving our concept, there are good indications at the end of the day with some of these particular clubs or cities where members appreciate our concept. I mean, we keep talking to members. We use a lot -- every time we travel, every time we find somebody that is from Colombia, we hear very positive comments about our concepts what we bring to the table. Obviously, everybody is concerned, even the way we raise prices, although they understand -- members understand why prices went up. I think we have -- if we get that currency to be stable, I think we definitely have a very good chance to move the needle in terms of the spending with the members. Keep educating them. We have to put into consideration also that this is a new market where a lot of these members are learning how to shop in the clubs, pack sizes, you name it. Now there are different things that you really -- I mean, when we talk about the other markets we have been there for many, many years, so the members are well educated on how to shop at the clubs. Colombia, our focus is with all this -- assuming all this stabilization in the market, to get the extra item in the basket to keep working on the members understanding our value. And in the meantime, we're trying to keep our expenses as low as possible, but still run a good business in Colombia. So I don't think we're disappointed that we got there. We didn't know things were going to turn out to be that difficult with the currency in the past 17, 18 months. But I think we're still definitely optimist of turning things around, and the opening of Chia is going to be strong for us. It has to be strong for us to prove, obviously, to keep proving our concept in that market.

Yes, okay, good. And then just on the openings, I think I asked you in the last call as well and now another 3 months have progressed. I'm pretty sure this is the longest period in the last 5 years where you haven't announced any new clubs being under construction, any new sites. Am I correct in that? And is it just because you're working on multiple different things and they suddenly -- they might just come out at the same time? Or because -- I mean, clearly, it's very important that there are more members in the existing stores and they're spending more and that is driving margins and revenue. But clearly, another thing is to continue to increase penetration and increase the number of clubs as well in the existing markets. Can you share anything on that compared to what you shared last time?

Yes. I'm not sure I keep the same account that you are keeping in terms of how often we announced. But definitely, it's been a while that we haven't announced a new building. We do have things on the works that definitely won't be announced until we get confirmation of sites. So there are -- in other markets different from our -- I will say, non-Colombia markets, we have activity on the real estate side that I hope we can come back with some good announcement soon, Thomas. We didn't -- by this time just decided not to announce anything or not to keep moving on projects. It just takes longer. In some countries, it is just slow process for getting permitting. But we didn't definitely lower our expectations in these markets. In the meantime, I will say, Thomas, also, we -- as I mentioned, we're doing some of the expansions in current buildings. We have found out, we believe, that's going to be another good vehicle to keep growing. In the past, when we have done them, we have seen good results. We haven't done parking decks, but we have good experience doing club expansions. We have done probably 5 or 6 in the past that have come to my mind in different markets in Panama. We expanded the one in Brazil. We expanded the one in the bid in Santo Domingo. We expanded one in Charles Sumner. We expanded Barbados. So we have -- we expanded Nicaragua at some point. So there is some history on expansions that helped us better serve our members, helped us grow our sales and definitely better members service, more parking. So there are different initiatives. The way to look at expansion would be in those 2 ways. And that's why everything we talk about in terms of growth is coming either from -- it's starting from the beginning, which is the DC, distribution centers to be able to serve the locations better. The clubs, obviously, that are getting expansion are getting more space -- more in the fresh areas, for sure. We're kind of seeing a big component of growth in our fresh areas, and that will be reflected in some of these expansions, as we do with the new clubs. So there are different pieces moving when it comes to expansion, Thomas, not limited only to the new buildings, but also to the current buildings that, obviously, you get a lot of leverage expanding those buildings. The investments are less and still good expectations that we have on sales growth for those.

Yes, that's clearly appreciated. And maybe just the last thing then. Can you share anything in terms of offerings? I mean, you've been talking about before that you are investigating other avenues on top of the bakeries, the tire centers considering the clubs. Is there anything that you think makes sense or may -- I know would appreciate you cannot share anything concrete, but just it says, you see anything that you could add on to clubs? Any new offering that you think it should be or another one?

We have a couple of things here or there, but nothing significant right now. I mean, in terms of adding things to our clubs, now we're just doing the regular expansions. I'm trying to think if I mentioned something in the past about that. We're definitely trying to improve. One thing we're doing, actually, is delivery to some business members and even Diamond members. So we're looking at different areas where we can improve our business and give the members more reasons to shop and make it easier for them to shop. So delivery will be one of the things that we're looking more seriously into adding into some of our locations when it comes to appliances and maybe business delivery. So those are kind of some of the initiatives we have. Nothing yet concrete on those now, but there are some ideas that we're definitely looking at doing on those terms, Thomas.

Our next question is from Scotiabank, Pablo Vallejo.

My first question is regarding the Colombian operation. Whenever we -- whenever you mentioned the example of the towel, how you switched to locally sourced, what would be -- first of all, would be another category you're looking into? Or in another way, what percentage is now imported? And where do you see it in the next year or so from the total merchant?

Let me -- I guess, you were going to say something?

Well, I was going to say, in terms of the split, I think we're just under 50% now was imported, whether you go back probably 2 years ago, we're probably 60% to 65% imported. And so some of that is the shift of some of the merchandise category. But I think a big part of it is the currency and the impact on the volume demand for imported merchandise, and I'll add to that.

I will say, Pablo, that, obviously, we have a list of items that we have been converting. Colombia is a big country. Fortunately, there are a lot of sources of merchandise. And when we look at -- it's kind of unique even for us in terms of the size of the country and the number of item opportunities that we have there. Towels was a good example of something I used, but we have done oils, we have done some detergents, we did pet food. We did -- we're looking at now doing some snacks. There are opportunities in different areas that is giving us not only the opportunity to bring items -- local items to Colombia, we're even exporting some of those items to other countries. We did also -- the towels is a good example of an item that we're doing not only for Colombia but even for other markets in other countries. So there is a component of items that we will continue developing, some of on our -- under our private label brand, Pablo, and will help us continue that growth of local merchandise in Colombia.

Got it. And whenever we -- whenever you guys speak about the new distribution center in Miami, is there any specifics that you can give us in terms of margin improvement that this might provide to the company once it's in full operation?

Well, it's going to be a more -- I mean, it's part of our overall efficiency of driving costs out of our distribution operation. It'll be -- we will not move to a new facility until probably April or May of next year. But it's -- and it's not the only activity we're doing in our distribution to continue to reduce costs and provide more efficiencies in how we distribute our products. I think similar to most things, when we take cost out, we -- I'm not sure -- necessarily sure it creates margin improvement as much as it, although it can contribute to that. But it does contribute to an opportunity for us to pass on lower prices to our members.

Yes, and that would be our goal. As much as we can, we want to see if we can lower our cost of handling the merchandise. This we see will be across the facility. It's designed to be much more efficient. At the same time, we roll out, a few months ago, a new warehouse management system in our distribution center. So that combination of those things should help us as part of our strategy that it is to just keep lowering our cost of operation and try to get that to the members, Pablo.

And one last question on store expansion. Has anything changed specifically in Colombia in terms of the process? Like are they -- is the government delaying the processing of new stores or nothing has changed in that front?

Nothing has changed that we're aware in that front of the government challenges. I think the challenges are the same, finding sites in a city like Bogota. That is definitely a key market for PriceSmart. I see this for everyone. It is challenging to find sites, and the permit is as difficult as it was probably 5 years ago when we started our -- established in Colombia. So I don't -- I wouldn't say that anything has changed, Pablo, dramatically for us from the government perspective. It's just continuing to be a challenge to find the appropriate sites, the size that we need and obviously getting permits. But nothing else has changed in that respect.

Okay. And if you could please remind me what would be the approximate average time for government agencies to do all the permits for zoning for a new store?

For Colombia, it will probably be about not less than 15 to 18 months maybe. It's pretty slow, a little over a year, I would say. Actually, I would say in most of the markets, it's becoming to be kind of 8 to 12 months. And in Colombia, it's probably a little longer, but it's not very unique to Colombia. It's a lot of permitting. I mean, when you do these big boxes in most of these countries, there are so many permits from -- permits and studies from traffic, environmental and a lot of those things that make things a little slow. But obviously, we can't take shortcuts, and we just follow the rules.

Amy, I think we're getting near the end of our time. Do we have other questions that we need -- that we should answer in the queue?

We have one final question.

Okay, we'll take that.

From RWC, we have Patricio Danziger.

So my question is, do you think you can have the same margins in Colombia you expected before the Colombian peso depreciation? Finally, if you think margins at some point should be better than in some -- than the other countries, given the size of the operation?

I will say to the first question, Patricio, I think, eventually, there's no reason why we shouldn't have similar margins to what we have in the other countries. It would probably be a little longer process, but eventually we see that -- I mean, that's how we opened Colombia. At some point, we didn't have really the differentiation with the other markets. That currency definitely put us in a difficulty to get into the same level, but I don't see any reason. I don't know if they will go higher this way. I'm not sure that's the way we view our business. I think we will get them to the level where we feel good about, obviously, running a good business. But we will probably -- I don't think we'll be using Colombia as the vehicle to get even more margins than the other country for any reason. It would just be business as usual at some point when we get it to that level. And just I hope instead of getting it through higher margin just because of rising prices there, I hope as things have stabilized, we should see it in the stronger sales and at the end of the day driving the bottom line with growth of sales, rather than just margin increases. But definitely, at some point, little by little, we should see Colombia getting more to the -- to look like the other countries. We have pretty much -- we have variations from country to country, but for the most part, they all run in a similar margin.

Yes. And just as a follow-up of that, do you think -- I mean, you've done these investments or these decisions when the Colombian peso was a lot stronger. And now the business has changed and you're competing with local merchandise. Do you think you can be, I would say, selling 80% local merchandise in the future? I mean, are you -- can you do that? Do you have the capacity to do that?

I'm not -- I don't know if it's about capacity, Patricio. I don't think that's our intention. Definitely, it's not our intention. I think what we bring to the table in Colombia, even with the challenges, is unique merchandise. And when you think about local merchandise going to 80%, I think our mix will remain -- it will grow a little bit more, eventually, with the currency stabilizing. But I see it, actually, probably a little bit higher component because there is more production in local goods in Colombia. But when you look at items like hard lines, for instance, anybody in Colombia will have to continue importing appliances, electronics, small appliances, TVs. I mean, a lot of those things are not made there. So we still think there will be a huge component. And again, also by design, a lot of the things that we bring to the table are unique imports that members still like. Obviously, with the currency, they have to adapt and digest the new prices in all of these goods. But we definitely see us still being the premier, I guess, player of imported and unique merchandise at good values in that market of Colombia. I wouldn't say we'll change our business model to that point that we'll be 80-20 or whatever number or even close to what Éxito or Cencosud or other players are doing. We will probably -- we will, for sure, remain with a key component of imported merchandise for that market as well.

Great. That's very helpful. And my last one is how many years does a typical store get mature? And how many years do Colombian stores have?

Colombia started in 2011. August 2011, we opened our first warehouse club there with Barranquilla. In terms of mature, I don't know. That one is a tricky one because it depends. If you put all these things on the blender like currency and whatever has happened in Colombia, I'm not sure it's -- we have had even the time to get that maturity in a lot of these buildings. The ones that we opened almost 2 years ago is going to be in 2014 [ph] that we opened.

Like October and November 2014, so that's not even about 1.5 year.

Yes, those have been 1.5 year. So I'm not sure. In normal conditions, they will probably be maturing in the second year when you get through. I think the first year, you always clean the first base of members that don't really -- that join you that they don't really belong to the club. And then you start stabilizing the whole business after the second year. But with Colombia, I will say that it's probably a little challenging, and it's going to take a little longer just because of the economic conditions and all the situations that were around those openings. I'm not sure there is a straightforward answer to how fast we can mature those markets, Patricio.

Yes, but in the other countries, the typical years of maturity would, say, are 2 years?

Yes, I will say that after 2 years, we definitely have convinced our members that really like the concept to stay with us, and we see renewals rates. We have seen that in every country. We lose -- in every place, every warehouse club, the first year, you kind of lose more members because of the fact that some of them were not the right numbers to join the club and some of them can't afford it. Some of them just don't like it as much. Some of them don't find the values they -- we will like them to find. So I will say that after 2 years, it's a good time to get clubs to be more mature.

When I'm saying mature, I'm thinking about margins there.

No. I will say, margins, I don't -- I wouldn't say that there's a different behavior in terms of margins in any market that we open. We -- I was thinking more in terms of renewals and members and the whole behavior of things, sales around that. Margins are -- we don't have any differentiation on margins in a new warehouse club versus another -- and more mature warehouse clubs. They usually behave very similar, Patricio.

Amy, I think -- any other -- I think we need to end our call. If there's any other questioners, I think we're at the end of our time.

There are no additional questions. Thank you.

Okay. Well, thank you, Amy. This ends our call. Thank you for joining us. Have a good day and a very nice weekend.

This concludes today's conference. Thank you for your participation. You may now disconnect.