PriceSmart (PSMT)
Retailer PriceSmart (PSMT) often is referred to as the Costco (COST) of Latin America. And so the company often is buffeted by turmoil in many of its markets. Of late, that turmoil has escalated, and it has had a severe impact. Earnings started turning south this summer and now same-store sales are falling.
Unrest in Nicaragua has hit revenue in that important market and raised fears that it will spread through PriceSmart’s supply chain while also affecting neighboring Costa Rica.
The strong dollar — driven in part by political considerations — has not only hurt PriceSmart’s reported earnings, but affected its business model in countries like Colombia. Weaker local currencies have led the company to source locally instead of from the U.S. — undercutting its competitive advantage against in-country rivals.
PSMT stock now is at a six-year low as a result. Its CEO is departing at the end of the year. There’s an interesting potential turnaround story here, as the company moves more strongly toward e-commerce and looks to accelerate its expansion in the region. But that plan simply can’t work without some help on the ground from the turbulent economies in which the company operates.
