PriceSmart (PSMT) (current price $18.42; 12 month target $37) operates 23 membership based warehouse club stores in Central America (i.e. Mexico) and the Caribbean. Similar to US-based warehouse stores, though smaller, PriceSmart stores primarily sell food, beverage, health and beauty, soft goods and house wares to small businesses and affluent consumers.

We raised our fiscal Q3 and full fiscal year 2008 EPS estimates for PriceSmart to $0.26 and $1.07 (from $0.24 and $1.05, respectively) after the company reported a second consecutive month of same stores sales increases that beat our estimates. PriceSmart indicated that May month comps rose 20.7%, following increases of 22% for April and 14% for March.

Initially we had modeled an overall comp increase of just 12% for the quarter, as we continue to expect extremely difficult comps to impact 2008 comparable store sales increases. Recall that March month comps were 14%, the lowest in quite some time. Clearly, however, the company continues to drive much higher than projected sales, despite the tough comps and easily blew away our targets for the quarter.

We increased our fiscal Q3 comp estimate to 18%, from 12%, which is essentially what the company has now reported. Our total warehouse sales estimate for the quarter increased to $277.9 million, up from $257.3 million previously, bringing our total net sales estimate for the quarter (including membership and export sales) to $283.3 million.

The company’s monthly sales figures also reveal that sales from new stores in Trinidad and Guatemala continue to run well ahead of our projections, indicating that these stores are performing strongly and that cannibalization of existing stores nearby the new ones has not been an issue.

PriceSmart should be reporting its full quarterly results at the end of June or in early July, but does not announce its reporting date ahead of time.

We continue to strongly recommend purchase of PriceSmart shares based on sustained store momentum evidenced by 20%+ comps and total sales growth in excess of 25%. Our model does not fully reflect the continued strong momentum in PriceSmart’s stores, and therefore estimates remain conservative.

• 2008 EPS: $1.07
• 2009 EPS estimate: $1.20

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Robert Maltbie

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