PriceSmart Inc (PSMT) 2017 Q1 法說會逐字稿

Good day and welcome to PriceSmart Inc.' s earnings release conference call for the first quarter of FY17, the three-month period ending on November 30, 2016.

(Operator Instructions)

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'll 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 FY17. 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'll 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 FY17 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 Colombia, good sales, and margin performance in many of our other countries, although with some challenges and a 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 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 US dollar sales growth related to some currency headwinds and generally 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. Our 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 US dollar and the Colombian peso has stabilized over the past six months, which had a beneficial impact on our business. The average exchange rate for the three-month period was slightly below 3,000 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 toward to our Salitre club in the city of Bogota that transferred business to the new location in Chia and 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 improvements 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 results 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 sign-up goals in nearly all of our markets. We finished the quarter with more than 1.499 million accounts, up 2.5% from a year ago and membership income was up 2.1%. The 12-month renewal rate at the end of Novembers 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 tick down 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're stabilizing currency and our efforts to improve the values of our 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 the quarter 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 were 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 continue to be difficult and it is hard to source hard currency to settle payments owed to PriceSmart Inc. for the merchandise we're importing to that market.

A decision was made during the month of December to take some steps to limit our exposure, shipping only the level of US merchandise to Trinidad that matches the level of tradeable currency that we can source in that market. These steps did not impact sales in the first quarter as the merchandise pipeline was already in place to fully support sales through November.

On our last call, I indicated that this measure was likely to result 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 tradeable currencies.

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 seventh warehouse club 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 Salitre 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 continued 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 8,000 square feet of sales floor space and 30% more parking.

While this impacted our sales during the construction period in Q1, the increased parking and overall improvement, particularly in the fresh areas, 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 center 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 push forward on sites for additional clubs in a few of our markets. The timelines for permits and approvals 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 the Christmas holiday.

Many of you on this call probably haven't had a chance to visit one of our clubs. I would encourage you to do so so that you can get to see the business behind all the numbers that we 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 with this this morning. For our 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 opened at least 13.5 months was 3.1%. We do not include our Masaya club, Nicaragua or our Chia, Colombia clubs in these comps, although Masaya will be included starting in January.

To achieve this level of sales in our warehouse club requires a significant effort and commitment on the part of our buyers, logistics and distribution personnel, our corporate and in-country 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 from 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 US 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 a 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 impacts in Honduras and Colombia. The Honduras subsidiary has a fairly high level of US 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 had also has large US dollar liabilities associated with the illiquidity situation there incurred $126,000 net less. 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 US entity, and PriceSmart Colombia related to our ongoing market 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 FY17. 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 inventory 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 close on a financing arrangement for up to 75% of the completed value of the Miami DC 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 would be happy to take any questions that you have. Aaron, can I turn things over to you?

Yes, sir.

(Operator Instructions)

And we'll 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.

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 countries, 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 expenses 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 transition 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 in Costa Rica, Trinidad and Dominican Republic.

Perfect. Good color. Thank you. And then onto gross margins. I know you guys said that subsiding currency pressures in Colombia 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, Nick. I think we definitely have learned a lot of things in Colombia the past year. Obviously, I think more than anything that reduction of markdowns is playing a good role. The fact that the currency is stable, that 3,000 helped us a lot this quarter and I think there's a curve also of 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 correction, some packaging.

I think all those things are playing into the improvements in margin and definitely we see that if, 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're now seeing. And definitely see improvement compared to last year, no? 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. 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.

Continuing on the gross margin, the gross margin's 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 the 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, that's, Ron, it is definitely something we keep in mind. Actually, it's a moving target with currency variations in some countries, even in Colombia, we keep obviously adjusting our margins and trying to keep our prices definitely where they need to be. There is no intention at all to keep increasing our margins. We're trying to improve them by an effort of reducing markdowns and other activities in throw-aways and different things 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 want to be as far as the value that we offer to the members. That's 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 would really just be the financing costs for the loan that we have there. So that would be the sort of incremental cost at that point.

And then we're actively marketing the idle space that we will then be vacating in our current facility and would hope that in FY18, we will have that sublet so that the interest costs that we are now incurring will essentially be offset with the reduced rent payments that we would be paying once we sublet. So I think there will be some incremental cost in probably the second half of the year but you'll see it really in the interest expense.

Okay. And you had a slight charge on the disposal of asset. What was that? That was just about $0.5 million more than last year.

Yes, that's an ongoing process as we do expansions and upgrade in our facility, we pull assets out and in some cases there's assets that have remaining useful life book value that we need to write off. That's just a combination across all the entities of undepreciated 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 and 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 80%s. The prior several years you were in the mid to high 80%s. 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 Colombia, basically. That's the driver of the increases. At some point, actually, the driver of that decrease is not because -- all things equal in Central America pretty much and the Caribbean, we have kind of the same trends and they have been trending very similar quarter after quarter.

Again, the biggest challenge is the improvement we start seeing in Colombia and we're 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 Colombia, 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%. That's our target. And we believe we're going to see much better results the remaining of the year in Colombia and should help get us there.

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

Oh, yes, it is definitely the goal. And that's, as I said, is exactly what is happening in Colombia, the combination of higher renewals, continue to see good sign-ups, it's driving the top-line sales and effectively also a higher renewal rate. That's kind of the trend that we see right now and I think we're going to see that one, we're 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.

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

Good morning, Jose, John.

Good morning, Jon.

Turning to the December comp of 3.2%, did you see some improvement in some of your larger markets, not Colombia, that were a 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 and Dominican Republic didn't have much of a change. Costa Rica ended a little bit better. We're still getting hurt a little bit with the currency, but it wasn't 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 DR, were 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, when we started, Jon, the effort of reducing shipments to Trinidad, we had so much in the pipeline that basically Trinidad had 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 the impact yet. I think we, as always, I'm 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 still -- we are pretty, I would say we're pleased with the results because we expected probably a tougher result in Trinidad. I think we were able to, with the help of the buying team, definitely, putting priorities to what to ship and how to ship it and try to minimize the out-of-stocks and try to, as we cut down some items that were not shipping, we're trying to make sure we have a replacement item that can take those sales.

So there is a big effort from buying and our operational team on trying to minimize the impact of this condition. And going forward in Q2, we may still see some effects, obviously, because we're 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's kind of our expectation.

Okay. Are you backing off at all? On 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 guess?

Maybe a little bit, but I still think we -- I mean, it would be nice if we can reduce that impact. We're trying to do our best. This is the first time we actually do something like this, reducing shipments that we do to 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 a regular month as we -- obviously, we sailed through a lot of that merchandise that we had in the pipeline. So I think in a few weeks we're going to have a better read, Jon, on what the real impact is going to be with Trinidad. We're also seeing some improvements in liquidity, not yet to the level we need to see it, but it's been a little better than in the past month.

So hopefully the combination of those things eventually will allow us to get to normal conditions in Trinidad and get -- I know that the economy has been a year since they also increased VAT. It's going to be a year in February.

So hopefully as we anniversary that, we're going to see better results also in terms of members at this point adjusted to the VAT increases and the economy, I'm not sure it's 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.

Great. John, the currency impact on the quarter was about $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 off at that, I think it was about $30 million?

Yes, we are. They're level in Trinidad because, again, we're matching our -- as we source currency, we are -- that's the factor that's driving our shipment. And I guess I'd add one thing to Jose Luis is a lot of effort on the part of my team to source incremental hard currency and we're seeing -- it's not just US dollars. We actually go after euros and Canadian dollars and other things that we can then translate into US.

And that has some impact itself to our currency because we source euros, that's one transaction, then we trade them again for US dollars. So there's some transaction costs associated with that that flows to our currency exchange costs. With the biggest number in this last quarter was Honduras.

We do have some large, fairly large liability in that, not to the same level as Trinidad, and the Honduran lempira did take a bit of an adjustment in November. It tends to devalue at a fairly constant rate, I'd say in the sort of range of about 0.5% per month but had a real tweak in November. In fact, we saw most of our currencies in November sort of have a off-trend devaluation in November.

Sort of the Trump bump in the opposite effect, right?

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

Okay. All right. So it was basically sort of a November surprise that really generated the --

Yes, we saw it in Colombia too. I think with 3,155, and now it immediately went back to 3,000 now.

Yes, yes. Okay. All right. Thank you very much.

Thank you.

We'll go next to Thomas Vester with LGM Investments.

Good morning, guys. Congratulations on the -- yes, hello, John and Jose Luis. Congratulations on the results. Just a couple of quick questions. Just on the membership fee in Colombia, have you finally raised it or are you keeping it the same level translating into (multiple speakers).

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

When do you expect to do that?

We don't have a --

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

Okay. Just on the change of administration in the US question from a European here, I'm not sure I fully understand. Let's say the corporate tax rate in the US changes. Let's say it 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 US, what kind of impact it has on PriceSmart and the P&L.

Sure. Well, it's 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 notion of worldwide taxation.

For us in PriceSmart, most of our income is generated overseas and our US income has to do with the various activities we do between us and our subsidiaries and the fact that there's foreign tax credits that we apply to our income here in the US that has a pretty big impact on what our US tax -- what the tax we pay in the US.

So if the tax rate goes down in the US, but we lose the use of some of those foreign tax credits, I think that could be a very different story than what we've got going right now. So we're certainly looking at it and trying to read the tea leaves, but it is pretty speculative now based upon the various proposals I know that are floating around.

Yes. Okay. Fair enough. Then just you mentioned again in this quarterly report the e-commerce. Can you give an indication of how much you're selling in the e-commerce channel in let's say a quarter like Q1?

Yes. It is still a small percentage of our sales, Thomas. And we're actually going to be launching a new platform where we're basically changing it as we speak. We expect to have it ready by February, which will be a more easy to navigate platform. It's going to allow us to do things that we're now not capable of doing. So we think that the relaunching our platform will definitely push our sales.

We're looking at how to better deliver 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 merchandise in the clubs. So we're looking at structural changes in the way we do e-commerce and more opportunities that we can do to change, I guess, our quality e-commerce business.

That's one of our big tasks this year, 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 future is going to be happening in -- a lot of things are going to be happening in the e-commerce multi-channel business. So we're definitely getting ready for that and hopefully we'll have some good things going on very soon.

Yes, because that's a little bit our feeling that -- I mean, one of the good things for you guys is that you, I mean, with the exception of Colombia, you're already in some fairly small markets 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 more markets you operate in so the attractiveness for the likes of Amazon, et cetera, and MercadoLibre to enter must be fairly limited because of this fairly small market.

So it just seems like there's a big opportunity there that you're not tapping. But it's great to hear that you've got your eyes on that ball and we look forward to see how you tap into it.

I've just got a technical question for you, John. It's just when we saw the same store sales number for December, I mean, we clearly thought great, it's the first time in a long time it's 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 very 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's a calendar effect. You take out the effects of the -- when we do comps, it's four specific weeks that end on a Sunday.

Okay.

We 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 holiday. So we're closed on Christmas Day. We're closed, in some clubs, on Boxing Day in some of the English speaking Caribbean and we're closed on New Year's.

But they all fell both in -- they fell into the comps between the two periods. So that wouldn't have an impact. But relative to our total sales, there always is some difference that relates to the calendar. So that gets normalized in the comps.

Okay. Understood. And just on the Managua club that went into the comps I think you said, Jose Luis, in January, how is that club doing? 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 upswing. Actually in US dollars, it's in the single-digit comp growth. But, it's doing good, so we should see some good results of that being included in the January figure.

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

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

Yes, I mean, looking at how many oil and gas countries have [develop] okay, clearly, 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 better use to go out and find some land to stick that $30 million into because it -- I mean, just looking at the currency, it looks like a fairly (multiple speakers).

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

Okay, fair enough. I would say the same. But, okay. Just the final question, just on new warehouses, Jose Luis. I get it that you point to the fact that it's just very difficult in the market you're 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 PriceSmart to find a period where it's taken 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?

Well, Colombia, I will set Colombia apart because the effect in Colombia kind of is slowed down a little bit our efforts, to some degree, in secondary cities in Colombia. I will say we didn't, as we definitely had to do that because we wanted to see what was going on with the currency and obviously we were proving our concept back then. But in the other countries, it's been pretty much business as usual.

We have been pushing hard and I think we are finding that in the big cities it's just more challenging to get the permits. I don't think we're doing anything different. We're actually pushing hard. I feel pretty optimistic.

We have a few projects in the pipeline that hopefully we will be able to push and get them to announce very soon. We have the possibility to announce them very soon. But right now, it's just been even a frustration process for us because it's just bureaucratic processes and a slow process, but we're hopeful that we will change that trend, Thomas.

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

Thank you, Thomas.

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

Yes. You were talking about the picking the US merchandise that you're 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?

We're not exactly looking at margin, not only. We're basically looking at good items, good sales, Ron, has nothing to do with the profit level of those items. We're just trying to serve our members with what they look more for and that's basically the priority, the number one thing.

Some items may be a little lower on the margin, but we're definitely more looking at how to keep our members happy with the items that they buy more often. That's 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 I have it handy. For December?

Also for Q1. For the flat (multiple speakers).

The Q1, I think we -- I'm not sure if we disclosed that in the Q or not. For December, yes, I don't have it handy.

Okay. No problem.

I'm sorry about that.

No problem. Okay.

It is on the Q. I don't have the Q in front of me, but it is on the Q on our highlights 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.

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 we -- well, I think when we looked at this originally, we went and did this in November, we were sort of targeting a reduction of about 20% of what we were at that point planned to do, although our plans always change based upon what the market conditions are. So against a plan that we were 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're seeing given the conditions in Trinidad and the efforts that are happening to source some additional currency. So it's 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're being able 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 $12 million we said was specific to Q2 and we might be able to normalize it and beyond that, given the biggest part of that $8 million to $12 million 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 were curtailing.

We might be sort of finding ourselves 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's the biggest, or the 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 disclosed it.

So it's four warehouse clubs out of how many clubs are in the Caribbean, I guess.

It's about -- for the Caribbean, it's going to be about 40% of our warehouse sales for the Caribbean.

Okay.

That will be close enough, 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.

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

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

Thank you.

Ladies and gentlemen, this does conclude today's conference. We thank you for your participation. You may now disconnect.