Good morning or good afternoon, everyone and welcome to the PriceSmart, Incorporated Earning Release Conference Call for the Second Quarter of Fiscal Year 2020, which ended on February 29, 2020. After remarks from our company representatives, Sherry S. Bahrambeygui; Chief Executive Officer, Michael McCleary, Chief Financial Officer, you will be given an opportunity to ask questions as the time permits. However the company has requested that questions to be limited three per person. As a reminder, this conference call is being recorded today, Thursday, April 9, 2020. Additional replay will be available from the conclusion of sales call through April 16, 2020 by dialing 1-877-344-7529 for domestic callers 41-412-317-0088; for international callers and entering replay access code 10139915. For opening remarks, I would now like to turn the call over to PriceSmart’s Chief Financial Officer, Michael McCleary. Please proceed, sir.

Thank you and welcome to the PriceSmart earnings call for the second quarter of fiscal year 2020. We will be discussing the information that we provided in our earnings press release and our 10-Q, which we both released yesterday afternoon, April 8, 2020. You can find both documents on our Investor Relations website at investors.pricesmart.com, where you can also sign up for e-mail alerts. As a reminder, all statements made on this conference call other than statements of historical fact are forward-looking statements concerning the company’s anticipated future plans, revenues and related matters. Forward-looking statements include but are not limited to statements containing the words expect, believe, will, may, should, estimate, and similar expressions. All forward-looking statements are based on current expectations and assumptions as of today, April 9, 2020. 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, 2019, as filed with the Securities and Exchange Commission on October 29, 2019 and the company's quarterly report on Form 10-Q for the quarter ended February 29, 2020 has filed with the Securities and Exchange Commission on April 8 2020. The company undertakes no obligation to update the forward-looking statements made during this call. Now, I will turn the call over to Sherry Bahrambeygui, PriceSmart’s Chief Executive Officer.

Good morning, everyone and thank you Michael. In the spirit of not taking anything for granted I want to thank everyone involved with this call who has made it possible to connect with our investors and our analysts so that we can inform you about our company's results for Q2 as well as tell you about our current activities. Although we're conducting this call from remote locations, I want to welcome Michael McCleary, as our official ongoing Chief Financial Officer. Michael has done an excellent job as our Interim CFO since December 10, 2019. He has been with the company for 16 years and he has extensive experience with our business and our leadership team. You know they say you really get to know a person's true colors in times of challenge and stress and the events of the last couple of months had revealed many more of Michael's great qualities. So normally I get right to sharing with you insights on key events that have influenced our most recent quarterly results. Our business ended the second quarter of fiscal year 2020 with strong results and good momentum. We were seeing benefits from many of the initiatives that we’ve been working on till the last year and we’re feeling pretty well-positioned for what we thought the rest of this year would look like. Then just about a couple of weeks into our third quarter in March, the World Health Organization recognized the novel strain of coronavirus, COVID-19 as a pandemic. This virus has caused a global disruption that has touched every one of us in some manner, including our employees and members across 13 countries. So by March, it was clear to us the world had changed and our focus quickly shifted to five main priorities. So priority number one,…

Thank you, Sherry and good morning or afternoon to everyone and my first earnings conference call as Chief Financial Officer. First, I would like to thank Sherry, the board and all of my other PriceSmart colleagues for their support during my interim CFO phase which has now led to this permanent position. However I would also like to acknowledge the difficult times we are all facing through the COVID 19 crisis and I extend my heartfelt best wishes to everybody on this call today as I imagine you all have been either directly or indirectly impacted by this crisis. As Sherry discussed earlier the second quarter of fiscal 2020 total revenues were $906.7 million an increase of 6.1% and gross margins rose 50 basis points to 16.6% compared to 16.1% in the second quarter of fiscal 2019. Total SG&A as a percentage of total revenue were 12.3%, an increase of 50 basis points versus the same period last year. The increase year-over-year was primarily driven by additional headcount related to the opening of our four new clubs and investments in talent to support our technology development and other administrative functions. Operating income was $38.8 million or 4.3% of total revenues in Q2 of fiscal 2020 compared to $36.5 million or 4.3% of total revenue for the same period last year. The improvement is largely due to higher net merchandising margins in the second quarter of fiscal 2020 versus the same period last year, partially offset by an increase in SG&A expenses due to our four new clubs as indicated earlier. Our effective tax rate for the second quarter of fiscal 2020 was essentially flat versus the prior year coming in at 33.1% versus the rate of 32.9% a year ago. While over the last few years, we have generally provided…

[Operator Instructions] First question comes from Rodrigo Echagaray of Scotiabank. Please proceed.

Thank you, operator, and thanks everyone for the call and congrats Michael on your new role. I would say, on my end, I’d like to perhaps hear your thoughts on what would it take for you to revisit store openings and I guess more specifically is this related more to the temporary disruptions on COVID-19 or is it more related to structural concerns with regards to the region where you operate in terms of the macro short-to-medium term. And I guess, the second question would be on the e-commerce front. What kind of growth are you seeing in the past few days, any color that you can share with us will be great? Thank you.

Good morning, Rodrigo. So, if I understand your first question was basically our decision to suspend some of the store openings or the club openings and you wanted a little color about -- around that, correct.

Yeah. I mean, I guess, how are you thinking about that. I mean, I guess, I’m trying to get a sense on, are we perhaps being obviously responsible and cautious for obvious reasons but once disruptions cease and everything goes back to “normal” then was are we looking at those store openings being back on the pipeline quickly, or is it something that will take a few months until you feel comfortable putting those back on the pipeline?

Well, let me put it to this way. Before the pandemic we were completely on track for those opening. So, it wasn't anything structural or in terms of the markets themselves that led us to decide not to do it. It was the pandemic and then of course the resulting impact of the pandemic can and may have on these markets going forward which is really the part that is the big unknown for all of us at this point. So with that kind of a variable at play the best answer I can give you is that we're just monitoring it. We're trying to get the best information we can and assess what the impacts on our markets are. And then at the appropriate time we will move forward. So as of now it seems that the most prudent thing to do in the face of this kind of unexpected event was to suspend that and preserve capital and focus on delivering our best performance for our members with the clubs that we have in the markets where we exist.

Got it.

Your second question related to e-commerce growth.

Yeah.

E-commerce, so it’s hard to quantify. Again this is all happening so quickly. I can tell you anecdotally that the response we're getting we – we tracked social media now. And we're much more connected to our members digitally. We're seeing the response and the reaction to having more online presence, the fact that our members can go now online and see our products, orders and pay for them at least in our first location so far. And that's all been extremely favorable. Now it’s about building up quickly, ramping up the operational side to be able to support the demand. So I can't quantify for you what the demand is but you know you can sort of assume that when people don't want to leave their home or if they do leave their home, they don't want to spend a lot of time being exposed to other people who might be carrying the virus. There's a real demand for e-commerce and there's a real demand for all of the types of shopping that you can do that minimizes physical interaction with other people and that's what we're focused on and that's what we've been expediting and making great progress on in a very short period of time.

So I guess, can you maybe share if all the stores or an X percentage of the stores have now the ability to - for customers to shop online and maybe do Click & Collect, how many stores are looking at that are capable of doing this?

Well, it's -- okay, if you look at the capabilities, the first step is to make sure that all the inventory that's available in the clubs is visible online. So having the online catalog that shows description, the price, the - whether or not the products available that now exists in all of our country. So that’s the development that’s happened since this pandemic was announced. Then you add on that the ability to – once you have that information, it opens the doors to the alternatives way to shopping. One is the ability to email or through phone conversations, contact a PriceSmart employee and be able to get an order or order something to be picked up or delivered. That’s what we're calling assisted shopping. That’s happening throughout a number of our clubs at this time. The most advanced right now is the Click and Collect which is – I'm sorry the Click and Go which is in we launched it in Costa Rica in our Santa Anna club. And that's been going extremely well and we have a very aggressive rollout plan to all of our other markets in a matter of weeks. So we started with one, make sure we got that kinks out, we're doing it right and set up the protocol so that we can efficiently roll this out throughout the rest of the company.

Well. That sounds like you guys have really stepped that up in the last few weeks which makes a lot of sense. And on the delivery if can just maybe double click on that for a second here…

So you know especially you are on question number four but it’s okay.

Sorry. I’ll – I’m just going to leave it at that and let somebody else. It's just that I have a lot of questions but I'll let other take turns.

That’s okay why don’t you ask that last one. Just try.

No. Just on the delivery I mean you were mentioning you're using both some aggregators and also you’re doing some in-house. Can you share more color on both of those strategies?

Yes. As you know given the fact that we operate in 13 different markets, the best solutions vary from market to market. In Colombia, we partnered with Rafy as one example and it's not a one solution for each market. It varies. We do a combination of having our own employees delivering, we've got secured vehicles that allow for us to be able to do deliveries, we partner with third parties and we are right on the brink of finalizing contract with another major delivery service if you will that will be able to provide the service to our members throughout most of our markets. So it's a combination of different channels that allow us to get the product to the members.

Got it. Thank you.

Thank you, Rodrigo.

Our next question comes from Jon Braatz with Kansas City Capital. Jon, please proceed.

Good morning, Sherry and Mike.

Good morning.

As you tackle this COVID 19 issue what kind of flexibility do you have in your cost structure at the store level and have you been making adjustments there, I was just curious what maybe potentially some deleveraging of expenses – how are you going to try and minimize that deleverage on expenses?

Well, with regard to that we’re watching every penny, a vision and Michael is doing a great job of that and we have eliminated or reduced what we considered to be any sort of access. But having said that we think it’s very important to have a balanced approach especially during this time. The initial instinct maybe to just hunker down and dial back on everything, but what we're actually finding is because of the situation our team is able to move forward pretty quickly on interventions and on our new initiatives that frankly we didn't know we could deliver on as quickly as we have and in that effort we're realizing that we actually need to deploy our resources and our labor in a more thoughtful way because there's opportunities here to now we scale some of our employees and assign them to tasks that will support these initiatives that we believe are not only needed by our members today but are going to strengthen our company for the long term today, but are going to strengthen our company for the long term. So while we're watching expenses and we're being vigilant about that and taking as responsible and compassionate and approach as we possibly can, we're also not shy about making the right investments in the right areas that are going to get us through this stronger than we were coming into it.

Okay, okay. Second question, Sherry, what are you seeing or maybe it’s a little bit early on the membership or new membership count. I saw that in Colombia, memberships were down year-over-year, up elsewhere. But how are your markets, how are you – how is the memberships roles as we get further and further into this COVID-19, are we seeing any material difference in the trend that we've seen over the last couple of years?

Well, I can't – I don't have in front of me March, but in terms of – I don't think we report anything in a partial month. So we're in April right now, so I can't really share anything more on that. But certainly, people right now are behaving differently in terms of what they're buying, how much they're buying, we're seeing surges and then we're saying changes in terms of average ticket and so on, but it's too soon for me to be able to share any kind of trend that I could predict or see emerging as a result of the membership.

Okay. All right. Thanks. One last question, if the product mix shifts more to necessities as opposed to other items that aren't so essential, how does that influence your gross margins? how -- a mix shift like that?

Well, I mean we're constantly trying to manage margins appropriately. We are continually looking for ways to make sure that we are getting the best value for the member consistent with the fixed rate as we see a greater need for essentials, the basic necessities, we’re leveraging local vendors as well and suppliers to make sure that we are able to deliver the products that they need. So, at this point, it’s again too soon to tell what will come out of this phase of dramatic shift in the way that people are shopping and the demand as well as the supply. And beyond that, I really don't have any more in the foresight.

Okay. All right. A lot of imponderables out there and I wish you best luck. It's a difficult environment.

We really appreciate your well-wishes and we're doing the best we can and we're feeling good about our ability to get through this and take care of our members and learn a lot in the process.

Got you. Thank you.

Take care.

This concludes our question-and-answer session. Thank you for attending today’s presentation. You may now disconnect.