Good afternoon, everyone, and welcome to PriceSmart, Inc.'s Earnings Release Conference Call for the First Quarter of Fiscal Year 2023, which ended on November 30th, 2022. After remarks from our Company's representatives Robert Price, Chairman, and Michael McCleary, Chief Financial Officer, you will be given an opportunity to ask questions as time permits. As a reminder this conference call is limited to one hour and is being recorded today, Tuesday, January 10, 2023. A digital replay will be available following the conclusion of today's conference call through January 17, 2023, by dialing 1-877-344-7529 for domestic callers or 1-412-317-0088 for international callers and by entering the replay access code 6032359. For opening remarks, I would like to turn the call over to PriceSmart's Chief Financial Officer, Michael McCleary. Please proceed, sir.

Thank you, operator, and welcome to the PriceSmart earnings call for the first quarter of fiscal year 2023 that ended on November 30, 2022. We will be discussing the information that we provided in our earnings press release and our 10-Q, which were both released yesterday afternoon, January 9, 2023. You can find these 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 plans, revenues, and related matters. Forward-looking statements include but are not limited to, statements containing the words, expect, believe, plan, will, may, should, estimate and some other expressions. All forward-looking statements are based on current expectations and assumptions as of today, January 10, 2023. These statements are subject to risks and uncertainties that could cause actual results to differ materially, including the risks detailed in the Company's most recent Annual Report on Form 10-K, the quarterly report filed on Form 10-Q yesterday and other filings with the SEC, which are accessible on the SEC's website at www.sec.gov. These risks may be updated from time-to-time. The Company undertakes no obligations to update forward-looking statements made during this call. Now I will turn the call over to Robert Price, PriceSmart's Chairman of the Board.

Thank you, Michael. Hello, everyone, and welcome to our first quarter of fiscal 2023 earnings call. On behalf of myself and our Board of Directors, I would like to express our appreciation to Sherry Bahrambeygui for her leadership during the past four years. Sherry's performance as CEO during some of the most challenging years in the history of PriceSmart has been marked by record revenues and profits, as well as membership growth, club growth and the launch of online shopping. Our Company is poised to build on Sherry's accomplishments. Sherry will remain on PriceSmart Board of Directors, where she will continue to make important contributions to PriceSmart's future success. I'm excited about re-engaging more directly in our Company's day-to-day business affairs. I have a very personal passion for PriceSmart. Our business takes place in countries that have significant economic and political challenges. Since our Company's beginning in 1996, we have been committed to operating our business at the highest standards related to our buildings and equipment, our merchandise and most importantly to providing an outstanding working environment for our over 10,000 PriceSmart employees, serving our members in the 12 countries and one U.S. territory in which we do business. U.S. PriceSmart stockholders can be proud of the investments you have made in our Company. Now I will turn the call back over to Michael.

Thank you, Robert, and welcome again everyone to this call. We had another outstanding first quarter with both total revenues and net merchandise sales exceeding $1 billion. Net merchandise sales increased by 8.6% after a negative 2.3% currency impact and comparable net merchandise sales increased by 5% after taking into account a negative 2.1% currency impact. By segment, in Central America, where we had 27 clubs at quarter-end, net merchandise sales increased 10.1% with an 8% increase in comparable net merchandise sales. All of our markets in Central America had positive comparable net merchandise sales growth. In the Caribbean region, where we had 14 clubs at quarter end, total net merchandise sales increased 12.9% and comparable net merchandise sales increased 6.6%. All of our markets in this segment also had positive net merchandise sales growth. In Colombia, where we had nine clubs open at quarter-end, net merchandise sales decreased 8.3% and comparable net merchandise sales decreased 13.1%. The decrease in Colombia during the current quarter was primarily due to the significant foreign currency devaluation that impacted net merchandise sales by 20.5% and comparable net merchandise sales by 19.6%. The comparable net merchandise sales decreased in Colombia contributed approximately 160 basis points of negative impact to total comparable net merchandise sales for the quarter. In terms of merchandise categories, when comparing our first quarter sales to the same period in the prior year, our foods category grew approximately 6%, our non-foods category grew 1% and our other business category grew 10%, primarily from our food service and bakery departments. Membership accounts grew 3.9% versus the prior year to 1.76 million accounts. We continued with strong 12 month renewal rates of 87.9% and our membership income was a record $15.9 million, an increase of 7.5% over the same prior year period. We…

[Operator Instructions] Our first question will come from Jon Braatz with Kansas City Capital. You may now go ahead.

Good morning, Robert, Michael.

Good morning, Jon.

Mike, I've got question for you. Listen going back to Colombia, obviously, it's a very difficult situation. Membership was down sequentially, comps were weak. In the 10-Q, you mentioned that you're considering some different strategies over the near term to confront these issues. And one of them was you might hold pricing steady and it could impact the gross margin. I guess two questions. Number one, have you adopted any new pricing strategies yet in Colombia? And if so, how far might you go in terms of holding prices and having a little bit of a negative impact on the gross margins?

John, this is Robert. And let me begin, I just want to greet everybody on the call, including, of course, our employees at PriceSmart. I want to thank for all the good work they do. We're taking a very serious look at how we want to deal with the sales situation in Colombia. We've got a big investment there. We've probably put more money into Colombia maybe than any other country we're in in terms of real estate. And I think now is the time for us to try to build that market. And even though the economy there is weak and of course, we also suffer because a lot of our strength is in imports and imports are particularly affected by the currency change. I think we can't be passive. And this is a long road in terms of how we think about Colombia and the future in that country. And so my -- I don't know the exact numbers, but I would expect that there could be some effect on margins, but we also hope that our suppliers are going to support us in terms of more aggressive pricing, particularly on imports so that we can begin to build sales volume at this time. So I don't think it's going to be a major thing in terms of margin impact, but I don't -- I think we're going to be more aggressive about how we build sales in Colombia.

Okay. Have you implemented anything yet? Or are you still in the process of thinking about this?

Well, we're doing more -- we haven't implemented anything yet, but we're doing more than thinking. We're really actually making plans and working with John Hildebrandt, our new President; and Ana Luisa, who is our Chief Merchant to try to develop a strategy that -- and we'll do it incrementally. We're going to test things out and make sure that what we do really impacts. The other thing to keep in mind is we have a second location opening in Medellín, and we want that location to open well. So what we'd like to do is begin to implement some more aggressive merchandising strategies in advance of that opening.

Okay. Okay. Secondly, you mentioned that your December comps were up 10.4%, which is a little bit ahead of what they most recently have been last quarter and so on. Did you see a similar improvement in the comps in Colombia in December?

Mike, do you want to answer that?

I don't have the Colombia.

I can answer that. I would say, in local currency, yes. But in translated dollars, no.

Yes. Okay. Okay. That's fair. Okay. All right. That's all I have right now. Thank you.

Thanks Jon.

Well, thank you for not having more questions.

Our next question will come from Hector Maya with Scotiabank. You may now go ahead.

Hi, thank you. Thank you very much for the opportunity and also for your time. I wanted to know about the surprises being over the CEO position, how many transition will it be? How much time do you think it could take and how difficult would it be defined an appropriate candidate to fill in? And it's more likely that this person might be an outsider to the company or from within?

Hi Hector, we're having a lot of trouble hearing you, it's coming little garbled, but I understood your question being related to the CEO transition. And I think how long we expect the interim position to last and what the strategy is for replacement, is it something along those lines?

Yes. Yes. Thank you. And if it's -- and if you believe it's going to be more likely an outsider to the company or from within?

Okay. So this is a very, very important question and a very important matter for the company. So what we have been -- our approach is going to discuss this with the Board and take our time to be sure we come up with a good answer, because the Board needs to be involved and this is a key responsibility of the Board is the leadership of this company and the resolution of this has to be done in a way that's really going to be good because there is a very challenging issue to make transition in CEO. And so we're going to take our time, we're going to make sure we do it right, but it will be a Board responsibilities.

Thank you. And on that note, I also wanted to know long-term strategy for the business could be changing with this movement and considering the implications of the appointment of David Price as Executive Vice President and Chief of Staff?

Sorry, I caught something about David Price and EVP, but I didn't catch the rest of it. Hector, I'm sorry, we're having a lot of trouble.

Yes. Sorry. If there are long-term strategic views for the business that could be changing, considering the appointment of David Price as Executive Vice President and Chief of Staff?

So, the question is, there will be changes in the business because of appointment of David Price, is that your question?

Sorry, I don't know if you can maybe try something different here.

I'm having a lot of trouble. Let me tell you one thing about David Price.

Is it better now? Sorry.

He's my son, you know, and he tells me on a regular basis that I'm too old to understand technology, so he's got to educate me in technology. So that's one thing that I expect from these young people that they're going to be able to provide much more relevant and knowledgeable information on technology than an old timer like myself.

Got it. Thank you. I don't know if I heard the answer correctly because I'm having issues here, probably on a prior one. Thank you. And the last question would be an operational question. If you could give us more color on the other expenses categories mainly on our FX impacts throughout these [indiscernible] if we believe that substantial review [indiscernible] level. Thank you.

All right. Hector, this is -- I'm very sorry, but we just had -- I heard ex-operational expenses and...

Would it be better in Spanish. You want to try in Spanish?

I'm just -- no, I think it's the communication line. I think it's more about the communication lines, he is just coming across were garbled. Try one more time, Hector, please?

Sorry. About the extensive category, mainly the FX impact the closest line. We saw that they were substantial versus historical levels. So what's the technology to give us more details on that?

I heard something about FX and something about expenses, is that the question about the level of FX expenses below operational income? Is that it?

Yes. That's the one.

Okay. Yes, good question. The primary component, the biggest component of that of the FX line continues to be the Trinidad FX premiums that we've been talking about for probably three years now, as being a significant component. The other component is actually related to an unusual circumstance we had this quarter versus other quarters where we had actually the big appreciation in Costa Rica, actually worked against us. You may recall, we've had some similar circumstances in the past, where we have a large dollar balance outstanding, which over time is the Costa Rican colón devalue as you would expect that to add more value to us. But particularly in this quarter we had a significant 8% devaluation. So that hurt us in Costa Rica. At the same time, we had the non-depreciation in Colombia, which where we have a liability position. So we do protect all of our long-term financing is protected through swaps in local currency loans, but our working capital tends to be fluctuate between dollars and local currency. So we had just kind of a perfect storm there of the Trinidad premium Colombia devaluation, also devaluation in Dominican Republic. And then the counterintuitive appreciation in Costa Rica kind of all worked against us during the quarter.

Got it. Thank you. Thank you very much. I'll try to touch up later [indiscernible]. Thank you.

Okay. Thank you, Hector.

We will now take the follow-up from Jon Braatz with Kansas City Capital. You may now go ahead.

Michael, you did a pretty good job on the expense line, the operating expenses. And one of the things you've said in the past is you're going to continue to invest in technology and so on. And did that spending moderate at all in the quarter relative to some prior quarters?

No, I wouldn't say it moderated. I mean, obviously, when we've talked about this before, when sales are going up and as a percentage of sales, it doesn't distort things as much as when sales are growing a little bit slower. But no, I wouldn't definitely not say that we've moderated.

Okay. So to the extent that revenues grow, let's say, mid-single digit, you think those expenses -- that expense -- technology expense might grow at a lower rate?

I'd say, TBD, Jon. I mean, we've got a lot, Robert alluded to it earlier. We've got a lot to do in the digital area and we've got commitments to continue along that path and that's the constant thing the revaluation within management and within the Board to the track and the pace. So lot of things to do and so we're just doing our best to balance that out, but sometimes you can imbalances as far as the sales growth versus our stated goal will continue down that path.

Okay. All right. All right. Thanks so much.

Thanks Jon.

This concludes our question-and-answer session. I would like to turn the conference back over to Michael McCleary for any closing remarks.

Okay. Thank you all for joining us today and we look forward to talking to you next quarter. Take care. Bye-bye.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.