PriceSmart, Inc. (PSMT) Q1 2017 Earnings Report, Transcript and Summary

Good day and welcome to PriceSmart Inc.’s Earnings Release Conference Call for the First Quarter of Fiscal Year 2017, the three months period ending on November 30, 2016. All participants are currently in a listen-only mode. After remarks from Jose 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, January 6, 2017. A digital replay will be available through January 31, 2017 following the conclusion of the call by dialing 888-203-1112 for domestic callers, or 719-457-0820 for international callers, and entering replay passcode 5691450. I’d now like to turn the conference over to Mr. John Heffner. Please go ahead, sir.

Thank you and welcome to our earnings call for the first quarter of fiscal year 2017. We’ll be discussing the information that we provided in our earnings press release, which we released yesterday, January 5, 2017 along with our 10-Q. This morning we also issued our December sales press release. You can find both press releases 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, 2016 filed with the Securities and Exchange Commission on October 27, 2016. 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 will turn this over to Jose Luis Laparte, PriceSmart’s President and Chief Executive Officer.

Good morning everyone, Happy New Year and thank you for joining us today. We finished the first quarter of our fiscal year 2017 with net warehouse sales of $716 million, an increase of 3.7% compared to the first quarter last year. Comparable warehouse sales for the 13-week period ending December 4, 2016 for the 37 warehouse clubs that have been opened at least 13.5 months were flat with the same 13-week period last year. As reported, net income for the quarter was $24.9 million, or $0.82 per share compared to $23.7 million or $0.78 per share a year ago. The results reflect an overall improvement in the financial results of Columbia. Good sales and margin performance in many of our other countries, although with some challenges and lower effective tax rate. Warehouse sales in our Central America segment grew 3.5% to $430 million with the addition of a new warehouse club in Nicaragua with that opened in November 2015. In this segment, we saw sales grow in Nicaragua, Panama, Guatemala, and Honduras. Costa Rica finished with a slight negative U.S. dollar sales growth related to some currency headwind and generally the sluggish economic growth. El Salvador also ended with negative single-digit sales growth impacted by construction activity at our Santa Elena club as part of our expansion efforts. The Caribbean had a sales decline of 2.3% when compared to the first quarter of last year. Trinidad, our largest market in the segment was down 5%, reflecting the current difficult economic conditions of that country. I will provide more details on our actions in place in Trinidad given these challenging times. The Dominican Republic and Barbados also had negative sales growth, while Jamaica, USVI and Aruba recorded sales increases. Colombia had a very strong quarter with total growth was 22.8%, which includes the addition of our new warehouse club in Chia that opened on September 1. The exchange rate between the U.S. dollar and the Colombian peso has stabilized over the past six months, which has a beneficial impact on our business. The average exchange rate for the three-month period was slightly below 3000 pesos to the dollar, essentially equal to last year's average for the first quarter. Our 13-week comp growth was 4.3%, which was affected by the cannibalization to our Salitre club in the City of Bogota that transferred business to the new location in Chia, a municipality in the northern suburb of Bogota. While most of the comp sales growth was on locally acquired merchandise, we did see some positive comp sales growth on imported merchandise for the first time in many quarters. Warehouse margins in the quarter were 15%, compared to 14.6%. The improvement on margin compared to last year are related to less markdowns compared to a year ago and a much improved margin picture in Colombia. Warehouse margins in Colombia increased 236 basis points from the first quarter of last year. While gross margins in Colombia are still below what we see in our more established markets. This year-on-year increase in gross margins in Colombia reflects the improving conditions we’re seeing there. The Colombia result alone contributed 18 basis points to the overall company's gross profit margin increase of 45 basis points. We had a good quarter in membership achieving our new signup goals in nearly all of our markets. We finished the quarter with more than 1,499,000 accounts, up 2.5% from a year ago and membership income was up 2.1%. The 12-month renewal rate at the end of November was 82%, showing an improvement from the 12-month period ending August 2016 that finished at 80%, largely related to the improving renewal rates in Colombia. If we exclude Colombia, the renewal capture rate was 86%, a slight takedown from the 87% at August end. We’re encouraged by the steadily improving trends in the renewal rate in Colombia and see this as an evidence that we are stabilizing currency and our efforts to improve the values of for merchandise, the members are also increasingly seeing the value that our membership provides. In addition, four of our five top clubs for new members in this first quarter were all in Colombia. Operating income for Ecuador was $38.3 million, compared to $37.3 million in Q1 of last year. Colombia achieved a positive operating income of $1.1 million, compared to a loss of 334,000 for the same quarter a year ago. Let me highlight a few items associated with the quarter before I address our December sales results, which we released just this morning. Trinidad continues to provide some challenges for us. As I mentioned in the last call, the conditions on the liquidity in the country continued to be difficult and it is hard to source hard currency to settle payments owed to PriceSmart Inc. for the merchandise we import to that market. A decision was made during the month of November to take some steps to limit our exposure, shipping only the level of U.S. merchandise to Trinidad that matches the level of tradable currency that we can source in that market. This step did not impact sales in the first quarter, as a merchandised pipeline was already in place to fully support sales through November. On our last call, I indicated that this measure was slightly to resolve in our Trinidad clubs running out of certain merchandise and a possible negative impact on our sales in that market, which we estimated to be in the $8 million to $12 million range for the second quarter. Our buyers have done a very good job in prioritizing shipments of the merchandise that our members rely most on, and our finance team is doing everything they can to access tradable currency. In December, we believe the shipments restrictions did have an impact on sales, but not to the level originally estimated. We will continue to monitor the situation going forward and hope we can minimize the impact to our sales and our membership experience as much as possible. On a more positive note, we started the quarter and fiscal year with a successful opening of our seven warehouse clubs in Colombia, in Chia. The municipality in the northern part of Bogota. Results are encouraging for the first quarter of sales, and it seems that the cannibalization to our existing Salitra club in the city is less than what we expected, which is having an overall positive impact on our sales growth in the greater Bogota area. We continue to see our membership base growing for the city as members in the northern part of Bogota now have the alternative to shop and renew their membership in this new more convenient located club. In the month of November 2016, we completed the expansion of our Santa Elena club in El Salvador where we added about 8000 square feet of sales force space, and 30% more parking. While this impacted our sales during the construction period in Q1, the increased parking an overall improvement, particularly in the fresh area is something that our members are now enjoying and we expect to see good returns on this investment in the remainder of the year and going forward. Other clubs in different countries are targets for similar expansions and we're proceeding with permitting in a few locations. Also in terms of construction and expansion, our future Miami Distribution Centre is slightly ahead of plan and we expect to take possession during the second quarter of this fiscal year, and be operationally during the third quarter of this year. Although we don't have anything to officially announce today, we continue to switch forward on sites for additional clubs in a few of our markets. The timelines for permits and approval is taking longer than we would like, but we feel optimistic about the projects that we have in the pipeline for future warehouse club openings. During the month of December, I have a chance to visit four different countries on a trip that I plan every year with senior members of our buying and operations team. This is to assess our readiness of the holiday and to identify together opportunities to continually improve our sales and member service. It is one of the most exciting times of the year to see our clubs. They are full of exciting merchandise to delight our members as they prepare for their Christmas holiday. Many of you on this call probably haven't had a chance to visit one of our clubs. I will encourage you to do so, so that you can get to see the business behind all the numbers that we’re report in these earnings calls. Sometimes the numbers don't tell the real story of what this merchandising business is about. You will see how we have developed a quality club business in the 13 countries in which we operate, providing not only branded imported merchandise but also a broad array of local regional items that our buying team has developed with the support of vendors in the region. Finally, let me comment on December sales, which we supplied this morning. Total sales for the month of December were $328.2 million, an increase of 2.9% from December last year. For the four weeks ended January 1, 2017, comparable warehouse sales clubs for the 37 clubs open at least 13.5 months was 3.1%. We do not include our Masaya club, Nicaragua or our Chia, Columbia club in this comp. Although Masaya would be included starting in January. To achieve this level of sales in our warehouse clubs requires a significant effort and commitment on the part of our buyers logistics and distribution personnel, our corporate and in-county staff, and especially our warehouse club personnel. 13 of our warehouse clubs did more than 10 million of sales in the month. I would like to thank everyone on the PriceSmart team for their contributions during the past quarter plus December. Thanks again for joining us today. After John's remarks, we will take your questions.

Thank you, Jose Luis. Let me briefly touch on a few additional items with respect to our financial results for the first quarter. Total SG&A expenses increased 43 basis points in the quarter as a percent of sales. Low or negative comp growth resulted in higher warehouse club operations expense ratios in Costa Rica, Nicaragua, the Dominican Republic, and Trinidad, and increases in corporate and U.S. buying spending were also contributors. We had interest income of 502,000, compared to 178,000 last year. We have cash on deposit in certain countries, particularly Trinidad, providing $324,000 of increased income. On the expense side, we had more interest expense related to higher level of short-term loans during the period, which carry a higher rate than our long term loans, although the long term loan balances decreased year-on-year. Foreign exchange transactions and revaluation of monetary assets and liabilities resulted in a $928,000 currency loss in the quarter, compared to a $244,000 loss in Q1 last year. We saw the largest negative impact in Honduras and Columbia. The Honduras subsidiary has a fairly high level of U.S. dollar liabilities and the lempira devalued 2.1% in the quarter, resulting in a $500,000 loss. Colombia incurred a loss of $334,000 of the peso, while more stable in the past, devalued nearly 7% in the month of November. Trinidad, a country that also has large U.S. dollar liabilities associated with the liquidity situation there incurred $126,000 net loss. The effective tax rate for the period was 31.5%, compared to 33.8% last year. This beneficial change was largely attributable to intercompany transactions between PriceSmart Inc., the U.S. entity and PriceSmart Colombia related to our ongoing market development's development efforts in Colombia. We spoke of this activity and its effect on our effective tax rate at our last call and indicated that we had expected to see a benefit to the effective tax rate of approximately 200 basis points in the first few quarters of fiscal year 2017. From a balance sheet perspective, the company ended the first quarter with a cash position of $175.4 million, a decrease of $24.1 million, since the beginning of the fiscal year. The ramp up of merchandise inventories for the December holiday period net of accounts payable used $30.7 million and we had capital spending of $17.4 million in the quarter, which included the completion of our Chia, Colombia club and warehouse expansion projects in Honduras, Guatemala, and El Salvador. We also had a net reduction of bank debt both short-term and long-term of $7 million. We are still on track to closing the financing arrangement for up to 75% of the completed value of the Miami D.C. project. The financing will be approximately $35.5 million, which we expect will occur in the second fiscal quarter. With that Jose Luis and I will be happy to take any questions that you have. Aaron, can I turn things over to you.

Yes sir. [Operator Instructions] And we will go first to Dave King with ROTH Capital Partners.

Hello guys, this is Nick Meyers on for Dave King, how are you doing?

Good, thanks.

Good, thank you.

Alright. First off, can you talk about the increase in SG&A and what’s driving that, is that mainly a function of store expansions and how should we think about the run rate going forward?

Well, I think we mentioned that the SG&A in our country, we do have increasing costs and we had a number of our - some of our larger countries that had flat or negative sales growth, so that impacts our expense ratios there. We can’t leverage expense as a percent of sales when the sales are flat or negative. So that was the primary driver. At the corporate level, we continue to invest in our buying activities. We had some transition area expenses in the first quarter as well for we have two new executives in our corporate headquarters. So that played a small role as well in Q1 as we transitioned those two new executives into their roles, but the bigger increases are, as it relates to percent of sales is the impact of low sales in Q1 and Costa Rica, Trinidad, and Dominican Republic.

Perfect. Good color, thank you. And then on to gross margins, I know you guys said that subsiding currency pressures in Columbia, as well as less markdowns helped the improving margins, is there anything beyond that and can you help quantify how much of that was currency versus the other factors?

This is Jose Luis. I think we definitely have learned a lot of things in Columbia the past year, obviously I think more than anything the reduction of markdowns is playing a good role. The fact that the currency is stable at 3000 helped us a lot this quarter and I think there is a curve also, the learning curve of what works, what doesn’t work in that market, which price points are too high for that market, which price points we should just not do, some corrections, some packaging. I think all those things are playing into the improvements in margin, and definitely we see that - assuming all things are equal with the currency being stable, we think that we should be able to maintain the levels of margins that we are now seeing and definitely see as an improvement compared to last year. The biggest part is definitely less markdowns that we’re having compared to last year.

Perfect. Thank you guys very much, and good luck this quarter and I’ll step back for now.

Thank you.

Our next question comes from Ronald Bookbinder with Coker Palmer.

Good morning and congratulations on a terrific December comp. Good to see things trending back up.

Thank you, Ron.

Continuing on the gross margin, the gross margin is actually trending sort of towards the upper end of the range that you guys are usually in, and given that comps seem to be going back onto the positive side that you should get leverage of SG&A to expand the operating margin, should we start to think about maybe some price cuts in Q2 to further provide value to the members that gross margin could actually be at a little bit lower level than it currently is?

Yes. Ron it is something that we keep in mind. Actually it is moving target with currency variations in some countries, even in Colombia we keep obviously adjusting our margins and try to keep our prices definitely where they need to be. There is no intention at all to keep increasing our margins. We are trying to improve them by an effort of reducing markdowns and other activities in our ways and different things that we can do just to improve margins, but definitely our focus continues to be driving the top sales and delivering value as much as possible. So, we will, there is a possibility we can see some adjustments in our margins going forward depending on, I guess currency variations and where we will be as far as the value that we offer to the members as a priority.

Okay. And when you take control of the new Miami DC in Q2, should we see an additional expense in that quarter? How should we think about that?

The expense for the second half of the year will really be the financing costs for the loan that we have there. So that will be the incremental cost at that point. And then the, we’re actively marketing the idle space that we will then be vacating in our current facility and would hope that in fiscal year 2018, we will have that sublet so that the interest cost that we are now incurring will essentially be offset with the reduced rent payments that we would be paying once we sublet, but I think there will be some incremental cost probably in the second half of the year, but you will see it really in the interest expense.

Okay. And you had a slight charge on the disposal of assets, what was that, that was just, it is about a half million more than last year.

Yes. That is an ongoing process as we do expansions and upgrading our facilities. We pull assets out and in some cases there’s assets that have remaining useful lives book value that we need to write off. So that’s just a combination across all the entities of un-depreciated balances of assets that we write-off when we replace them and take them out of service as part of our approach to expand or to have operational improvement or upgrades to our facilities in warehouse clubs.

Okay. And lastly, on the memberships, you ended last year with a 80%, 12-month run rate of renewals, you ended this quarter at 82%, 12-month run rate, you must have had a substantial increase of membership renewals compared to Q1 last year, and it seems last year you were in the low 80s, the prior several years you were in the mid-to-high 80s. How do you see that trending now and what is driving the substantially higher increase in renewals?

Yes. The biggest change is coming Ron from Columbia, basically that’s the driver of the increases. At some point, actually that driver of the decrease is not because all things equal in Central America, pretty much in the Caribbean, we have the kind of the same trend and they have been trending very similar quarter-after-quarter. Again, the biggest challenge is improvement we start seeing in Colombia, and we are still, when we report renewal capture rate we report 12-month renewals and as we get more months into the quarter, into this year with the results of Columbia, we should actually, we expect to see that number going up again hopefully to the levels that we were having total company of 85%, 86%. Now that’s our target and we believe we are going to see much better results in the remaining of the year in Colombia and to help get us there.

And as we see you guys know to that 85%, 86% run rate won’t comps be nicely positive once again?

Oh yes, it is definitely the goal and that’s exactly what is happening in Colombia, the combination of higher renewals continue to see good signups is driving the top line sales and effectively also higher renewal rates. So that’s kind of the trend that we see right now and I think we're going to see that when we are pretty optimistic we can see that going forward the remaining of the year.

Okay great. Thanks for taking my questions and good luck going forward.

Thank you, Ron.

Thank you.

We'll go next to Jon Braatz with Kansas City Capital.

Good morning jersey Jose, John.

Good morning, John.

Turning to the December comp of 3.2%, did you see some improvement in some of your larger markets, not Colombia that were little bit weak in the first quarter like Costa Rica and Dominican Republic, are you seeing those markets bounce up a little bit?

Costa Rica, Dominican Republic didn't have much of a change. Costa Rica ended a little bit better. We are still getting a little bit with the currency, but it was in the best month for Costa Rica either in December. We definitely see stronger results in other markets than those two. Those in particular Costa Rica and we are still a little weak in December.

Okay. Jose you mentioned that the impact in December in Trinidad wasn't as severe as you thought, did I understand that correctly?

Yes. The thing is that, when we started John the effort of reducing shipments to Trinidad, we had so much on the pipeline that basically Trinidad has kind of a regular month as far as inventory and availability of inventory in December and definitely Q1. So that’s why we didn't really see much of that impact yet. I think we all, as always, I am sure there were some out of stocks that we had because of the reduction of shipments that we had. We also had some challenges even with local merchandise. The whole Trinidad market has been a little challenging not only because of the liquidity issues, but more than anything the whole economy is having challenges. So, we definitely feel, we are pretty, I would say we are pleased with the results because we expect probably a tougher result in Trinidad and I think we were able to, with the help of the buying team definitely putting priority to what to ship and how to ship it and trying to minimize the out of the stocks and trying to - as we cut down some items that we are not shipping, we're trying to make sure that we have our replacement item that can take those sales. So there is a big effort from buying and obviously we are an operational team and trying to minimize that impact of this condition. Going forward, in Q2, we may still see some assets obviously because we are not shipping as much as we may need, but hopefully we will be able to reduce them if we are selecting the right items and that is kind of our expectation.

Are you backing off at all, in the 10-Q you mentioned the impact might be $8 million to $12 million in sales or something like that, given what you have seen to date in this quarter that you might back-off a little bit from that that…

Maybe a little bit, but I still think, I mean - it would be nice if we can reduce that impact on, and we are trying to do our best. This is the first time we actually do something like this, reducing shipments that we do a country, even selecting what to ship, what not to ship has been a challenge because we usually work the other way completely. Even our systems are not designed to reduce what we ship. So, I think we can probably minimize it a little bit more, but it’s hard to tell. I think the real story we will see it in January as we get more of the regular month as we, obviously with sales through a lot of that merchandise that we have in the pipeline. So, I think in a few weeks, we are going to have a better region on what the real impact is going to be with Trinidad. We’re also seeing some improvements in liquidity, not get to the level we need to see it, but this has been a little better than in the past month. So, hopefully the combination of those things eventually will allow us to get normal conditions in Trinidad, and get, now that the economy has been ideal since they also increased the VAT it’s going to be ideal in February, so hopefully as [indiscernible] that we're going to see better results also in terms of members at this point adjusted to the VAT increase and the economy, I’m not sure is completely healthy right now, but it is what it is, we're going to do our best to be there for our members and try to minimize the impact on sales.

John the currency impact on the quarter was above 960,000, anything you can do on that front, anything more you can do on that front to minimize that? And secondly will your dollar denominated liabilities in Trinidad continue to increase or will it be sort of level of, I think it was about $30 million?

Yes, they are level in Trinidad because again we are matching our - as we source currency, we are, that is the factor that is driving our shipments. And I guess I’d add one thing to Jose Luis', a lot of effort on the part of my team to source incremental hard currency and we are seeing you know, so it is not just yours dollars we actually go after Euros and Canadian dollars and other things that we can then translate into U.S. And that has some impact of sales to our currency because we source Euros that’s one transaction than we trade them again for U.S. dollars so there is some transaction costs associated with that that flows to our currency exchange cost. The biggest number in this last quarter was Honduras. We do have some fairly large liability that with the same level as Trinidad and the Honduran lempiras did take a bit of an adjustment in November, it tends to devalue at a fairly constant rate, I would say in the sort of range of about half a percent per month, but had a real tweak in November. In fact, we saw most of our currencies in November, have a off-trend devaluation in November.

Sort of the trump bump in the ops effect, right?

I’m not attributing it to anything other than just stating the facts.

Okay. Alright, so it was basically sort of a November surprise that really generated the…

Yeah, we thought in Columbia too. I think what the 31 [indiscernible] it immediately went back to 3000 now.

Okay. Alright. Thank you very much.

Thank you.

Thank you.

We will go next to Thomas Vester with LGM Investments.

Good morning guys.

Hello.

Congratulations on the - yeah hello John and Jose Luis, and congratulations on the result. Just a couple of quick questions, I mean just on the membership fee in Columbia, have you finally raised it or is it you are keeping at the same level transferring into a $25?

At this point Thomas we are at the same level. We are doing some research, but at this point it is the same stock level 65,000 pesos, which I guess goes to about $20, depending when you look at it, but about $20 right now, but we haven’t done any changes Thomas.

When do you expect to do that?

We don’t have…

The thing is, Columbia just had a VAT change, so I think we need to reconsider if nothing else, what the pricing should be relative to any change of VAT, so I think needs to be a view as we look at Columbia.

Okay. Just on the change of administration in the U.S., question from a European here, I’m not sure I fully understand, let’s say the corporate tax rate in the U.S. changes, let’s say goes down to 20 John, realistically what is the impact on the effective tax rate of PriceSmart, can you give any some kind of indication of that, just so we understand if corporate tax change happens in the U.S., what kind of impact it has on PriceSmart and the P&L?

Sure. It is pretty speculative I think Thomas because I don't think that change will happen in isolation, I’m also seeing information as we sort of read the tea leaves around what might happen with foreign tax credits, and the whole motion of worldwide taxation. For us in PriceSmart, most of our income is generated overseas and our U.S. income has to do with various activities we do between us and our subsidiaries, and the fact that there is foreign tax credits that we apply to our income here in the U.S. that has a pretty big impact on our U.S. tax - the tax we pay in the U.S. So, if the tax rate goes down in the U.S., but we lose the use of some of those foreign tax credits, I think that could be a very different story then what we got going right now. So, we're certainly looking at it and trying to read the tea leaf, but it is pretty speculative now based upon the various proposals I know that are floating around.

Okay, fair enough. Then just on, you mentioned again in this quarterly report, the e-commerce, can you give an indication of how much you are selling in the e-commerce channel in the - say in the quarter like Q1.

Yes, it is still a small percent percentage of our sales Thomas. And we are actually going to be launching a new platform where we are basically changing as we speak. We expect to have it ready by February, which will be a more easy to navigate platform, it is going to allow us to do things that we are now not capable of doing. So, we think that we are re-launching our platform will definitely push our sales, while looking at how to better the lever merchandise to homes versus the way we do it right now that is with the exception of Colombia right now, basically. The members have to go pick up the merchandising the clubs. So while looking at the structural changes in the way we do e-commerce and more opportunities that we can do to change, I guess the whole e-commerce business. That’s one of our big tasks this year and how to keep growing that and even though it’s been growing in general we don't feel it’s at the level we would like to see it. And it’s been a learning curve for us and we know that a lot of the future is going to be happening in, a lot of things are going to be happening in the e-commerce multichannel business. So, we’re definitely getting ready for that and hopefully we will have some good things going on very soon.

Yes because I mean that’s a little bit off feeling that I mean, one of the good things for you guys is that, I mean, with the exception of Colombia, you are already in some fairly small market rates and you must be sitting on one of the most attractive, already existing platforms in terms of merchandise in many of these markets and it is smaller markets you operate in, so the attractiveness for the lights of Amazon etcetera and [indiscernible] to enter must be fairly limited because of this fairly small market. So, it just seems like there is a big opportunity there that you are not tapping, but it is great to hear that you got your eyes on that ball and we clearly look forward to see how you dive into it. I just got a technical question for you John, and it is just - when we saw the same store sales number for December, I mean we clearly fourth grade [ph], it is the first time in the long term it has been that high, but I'm not sure I really understand how the same store sales number could be higher than the sales increase. I understand that it can be that, but it just seems difficult also in the fact that in the sales increase you had one more club, so 39 compared to 38 last year, can you just explain how that was?

It is a calendar effect. If you take out the effects of the - when you do comps it is four specific weeks that end on a Sunday. If you do a month, it becomes just a month and depending on how weekends fall within a month compared to the month earlier, now there is no difference in December between the holidays, so we are closed on Christmas Day or closed on - in some clubs on Boxing Day and some of the English-speaking Caribbean and we are closed on New Year's, but they all fell both in - they fell into the comps between the two periods. So that would have an impact, but relative to our total sales, but only there is some difference that relates to the calendar. So, I get normalized in the comps.

Okay understood. And just on the Managua club fell into the comps, I think you said Jose Luis in January, how is that club doing, I mean how is the sales trending compared to when it opened, is it improving or is it flat or?

No, it’s actually growing. So it is in the actually in U.S. dollars is in the single-digit comp growth, but it is doing good. So we should see some good results of that being included in the January figures.

Okay great. And just on the Trinidad, did you say how much cash you have stock in Trinidad John?

We didn't. It is a sizable number. We have about $30 million of exposure. So it is somewhat over $30 million of money that, if we could translate the TT dollars we have there into U.S. dollars, we could settle that payable between us and Trinidad. So, it is certainly north of $30 million.

Yes but looking at how many oil and gas countries has developed, I guess the improvement in liquidity you referred to Jose Luis is also due to the improving oil price after the OPEC deal, but it could sound like it would be a better used to guard and find some land to take back $30 million into because I mean just looking at the currency it looks like…

Well the problem with buying land in Trinidad is no one will take our TT dollar to buy the land, they want in U.S. dollar to buy the land.

Okay fair enough. I will say the same about that. Okay. Just the final question, just on the new warehouses, Jose Luis is there, I mean I get it that you point to the fact that it’s just very difficult in the market you are in sometimes, but it always has been the case and it is a very low period that we have to go very far back in the history of price not to find a peer price, it has been taking you so long to come up with any new sites, is it just unlucky or have you also been more cautious maybe because of the experience in Colombia that has created some hesitation or can you elaborate a little bit on that?

Yes, well Colombia - we will set Columba apart because it is effecting Colombia kind of a slow down and little bit of our efforts to some degree in secondary sales in Colombia. I wouldn't say we didn't, as we definitely had to do that because we wanted to see what’s going on with the currency and we were proving our concept back then, but in the other countries it has been pretty much business as usual. We have been pushing hard and I think we are finding that in the big cities it is more challenging to get the permits, I don't think we are doing anything different. We are actually pushing it hard to sell. I feel pretty optimistic, we have a few projects in the timeline that hopefully we will be able to push and get them to announce very soon. We had the possibility to announce them very soon, but right now it has been just - even a frustration process for us because we just, they are just - it's just bureaucratic processes and slow processes, but we are hopeful that we will change that trend from us.

Okay great. Thank you so much both of you for your time and again congratulations on the results.

Thank you, Thomas.

We will take a follow-up from Ronald Bookbinder with Coker Palmer.

Yes. You were talking about the - picking the U.S. merchandise that you are selling down in Trinidad as to what to cut back on, are you picking the higher margin items to sell in Trinidad or are you just trying to keep it sort of across all categories?

Well we are not certainly looking at margin at all, we are basically looking at good items, good sales are Ron. It has nothing to do with the profit level of those items. We're just trying to save our members with what they look more for and that’s basically the priority, the number one thing. So mine is may be little over in the margin, but we are not definitely more looking at how to keep our members happy with the items that they buy more often. That is kind of the formula for what to ship to Trinidad.

Okay. And also could you break out the traffic versus ticket on the comp?

I don't think we did. I'm not sure we have this handy, for December.

Also for Q1?

For Q1 I think, I’m not sure if it was in the Q or not. For December, the - I don't have it handy.

Okay, no problem.

I'm sorry about that.

No problem.

It is on the Q. I don't have the Q in front of me, but it is on the Q. For the quarter, yes. Okay, anything else Ron?

No, thank you very much.

Thank you.

Thank you.

We'll go next to Mark Larry with Sandhill Investment Management.

Hi good morning John and Jose Luis. Question on Trinidad, can you give us a sense of perhaps how much you’ve reduced shipment by?

Yes, I think when we looked at this originally, this November, we were sort of targeting a reduction of about 20% of what we would at that point plan to do. Although our plans always change based upon what the marketing conditions are. So, it’s against a plan that we are planning to ship into in the second quarter, it was about 20%, the difficulty now is attenuating that number relative to the actual demand that we are seeing given the conditions in Trinidad and the efforts that are happening to source some additional currencies. So, it is a bit of a moving target for us, but it is down from what we would have normally shipped in.

Okay, thanks that's helpful. And then just one follow-up on Trinidad, that $8 million to $10 million Q2 number you guys put out there, or discussed, is that something we could see carry on throughout the remainder of the year if conditions do not change?

Well given what we have been unable to source right now and again you don't know if that would, if that becomes more difficult or eases a bit, I think that $8 million to $10 million you said was specific to Q2 and we might be able to normalize it and beyond that given the biggest part of that $8 to $12 was the view of what was going to happen in December given the large amount of sales that generally happen in December that we know we are curtailing, we might be sort of finding our self back into equilibrium over the next two or three months, but again I don't want to speculate given the currency situation there.

Okay great. Thanks that's helpful and then really quickly I know Trinidad is the biggest largest market in the Caribbean, any sense of just typically how much of sales that is of the Caribbean, maybe 2016 numbers if you have it handy or just a sense I don't believe you disclose it.

Those four warehouse clubs, I don't know how many clubs are there in the Caribbean I guess…

For the Caribbean it is going to be about 40% of our warehouse sales, for the Caribbean. That will be closing up Mark 40% to 42% of our sales.

Okay, excellent. Very helpful and congrats on the December comp and good luck guys, thank you.

Thank you, Mark.

Thank you, Mark.

And with no further questions in queue, I’d like to turn the call back to John Heffner for closing remarks.

Thank you, Aaron. And that thank you all for participating with us today. This ends our call. Have a good day and a nice weekend.

Thank you.