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PriceSmart Investor Relations December 2016

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Page 1: PriceSmart Investor Relations to PSMT.pdf · PriceSmart Investor Relations December 2016. 2 Forward Looking Statements ... although we have begun to offer limited online shopping

PriceSmart Investor RelationsDecember 2016

Page 2: PriceSmart Investor Relations to PSMT.pdf · PriceSmart Investor Relations December 2016. 2 Forward Looking Statements ... although we have begun to offer limited online shopping

2

Forward Looking Statements

This presentation may contain forward- looking statements concerning the Company's anticipated future revenues and earnings, adequacy of future cash flow

and related matters. These forward-looking statements include, but are not limited to, statements containing the words expect, believe, will, may, should, project,

estimate, anticipated, scheduled, and like expressions, and the negative thereof. These forward-looking statements include, but are not limited to, statements

containing the words “expect,” “believe,” “will,” “may,” “should,” “project,” “estimate,” “anticipated,” “scheduled,” and like expressions, and the negative thereof.

These statements are subject to risks and uncertainties that could cause actual results to differ materially, including the following risks: our financial performance

is dependent on international operations, which exposes us to various risks; any failure by us to manage our widely dispersed operations could adversely affect

our business; we face significant competition; future sales growth depends, in part, on our ability to successfully open new warehouse clubs and grow sales in

our existing locations; we might not identify in a timely manner or effectively respond to changes in consumer preferences for merchandise, which could

adversely affect our relationship with members, demand for our products and market share; although we have begun to offer limited online shopping to our

members, our sales could be adversely affected if one or more major international online retailers were to enter our markets or if other competitors were to offer

a superior online experience; our profitability is vulnerable to cost increases; we face difficulties in the shipment of and inherent risks in the importation of,

merchandise to our warehouse clubs; we are exposed to weather and other natural disaster risks; general economic conditions could adversely impact our

business in various respects; we are subject to risks associated with possible changes in our relationships with third parties with which we do business, as well

as the performance of such third parties; we rely extensively on computer systems to process transactions, summarize results and manage our business; failure

to adequately maintain our systems and disruptions in our systems could harm our business and adversely affect our results of operations; we could be subject

to additional tax liabilities; a few of our stockholders own approximately 26.0% of our voting stock as of May 31, 2016, which may make it difficult to complete

some corporate transactions without their support and may impede a change in control; failure to attract and retain qualified employees, increases in wage and

benefit costs, changes in laws and other labor issues could materially adversely affect our financial performance; we are subject to volatility in foreign currency

exchange rates; we face the risk of exposure to product liability claims, a product recall and adverse publicity; any failure to maintain the security of the

information relating to our company, members, employees and vendors that we hold, whether as a result of cybersecurity attacks on our information systems,

failure of internal controls, employee negligence or malfeasance or otherwise, could damage our reputation with members, employees, vendors and others,

could cause us to incur substantial additional costs and to become subject to litigation and could materially adversely affect our operating results; we are subject

to payment related risks; changes in accounting standards and assumptions, estimates and judgments by management related to complex accounting matters

could significantly affect our financial condition and results of operations; we face increased public company compliance risks and compliance risks related to our

international operations; if remediation costs or hazardous substance contamination levels at certain properties for which we maintain financial responsibility

exceed management's current expectations, our financial condition and results of operations could be adversely impacted. The risks described above as well as

the other risks detailed in the Company's U.S. Securities and Exchange Commission (“SEC”) reports, including the Company's Annual Report on Form 10-K filed

for the fiscal year ended August 31, 2015 filed on October 29, 2015 pursuant to the Securities Exchange Act of 1934.

The statements and information in the presentation are current only as of its date, and we do not undertake to subsequently update them.

This presentation may include certain non‐GAAP financial measures such as Adjusted EBITDA intended to supplement, not substitute for, comparable GAAP

measures. Reconciliations of non‐GAAP financial measures to GAAP financial measures are provided at the end of the presentation. Investors are urged to

consider carefully the comparable GAAP measures and the reconciliations to those measures provided.

For further information, please contact John M. Heffner, Principal Financial Officer and Principal Accounting Officer (858) 404- 8826

Page 3: PriceSmart Investor Relations to PSMT.pdf · PriceSmart Investor Relations December 2016. 2 Forward Looking Statements ... although we have begun to offer limited online shopping

3

Introduction to Pricesmart

Company Overview 1

Current Business Update2

Appendix3

Page 4: PriceSmart Investor Relations to PSMT.pdf · PriceSmart Investor Relations December 2016. 2 Forward Looking Statements ... although we have begun to offer limited online shopping

Company Overview

Page 5: PriceSmart Investor Relations to PSMT.pdf · PriceSmart Investor Relations December 2016. 2 Forward Looking Statements ... although we have begun to offer limited online shopping

Our Heritage

5

Page 6: PriceSmart Investor Relations to PSMT.pdf · PriceSmart Investor Relations December 2016. 2 Forward Looking Statements ... although we have begun to offer limited online shopping

6

Today, PriceSmart is a Leading Pan-Regional

Membership Warehouse Club Operator

Net Warehouse Sales Breakdown

U.S.-style Membership warehouse club operator

― First club opened in 1996 in Panama

― Company went public in 1997

― Nasdaq Global Select Market (PSMT)

Headquarters and primary DC in the U.S.

2.7Bn+ market cap

LTM Sales of $2.8Bn

― 94K total transactions per day

― Annual average sales: $74.6MM/club

39 warehouse clubs across 13 countries

― 2.9MM+ sq ft (48,000 to 100,000 per club)

― 82% of clubs’ real estate is owned

1.5MM membership accounts

― Over 2.8MM card holders

― 86% renewal rate in established markets

(excludes Colombia)

Business Overview (1)

Business

20%

Retail

80% Central America

61%

Note: (1) Data as of 11/30/16

Pan-Regional Presence

Guatemala (3)

El Salvador (2) Nicaragua (2)

Honduras (3)

Jamaica (1)

Dominican

Republic (3)

Barbados (1)

USVI (1)

Aruba (1)

Trinidad (4)

Colombia (6)

Panama (5)Costa Rica (6)

San Diego – Headquarters

Miami – Primary Distribution Center

Mexico – Distribution Center

Los Angeles – Distribution Center

Caribbean

29%

Source: Company estimates Source: 10-Q FY2017

Colombia

10%

Page 7: PriceSmart Investor Relations to PSMT.pdf · PriceSmart Investor Relations December 2016. 2 Forward Looking Statements ... although we have begun to offer limited online shopping

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Market Cap LTM Revenue7

Historical Perspective

($MM)

Market Cap

has increased

approximately

30x since 1998

1996-2002 Future2003-2005 2006-2010 2011-2016

Continue Investments

Additional capacity

Operational improvements

New warehouse clubs

― Established

markets

― Colombia

Rapid Unit Expansion

Established

presence in

Caribbean and

CEAM markets

Transition / Inward

Focus

Closed non-

performing clubs

Exited markets

(Philippines,

Guam, Mexico)

Focused on

merchandising,

operations and

membership

Recapitalization of

Company with

rights offering

Back to Organic

Growth

Added clubs in

larger markets

SSS growth of

20.1%, 8.7%, and

8.2% in 2008,

2009, and 2010,

respectively

Good Cash Flow / New

Markets

Entered Colombia

Expanded to 6

locations in the

country

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

($MM)

Page 8: PriceSmart Investor Relations to PSMT.pdf · PriceSmart Investor Relations December 2016. 2 Forward Looking Statements ... although we have begun to offer limited online shopping

8

Attractive Warehouse Club Facilities

Exteriors Interiors

Page 9: PriceSmart Investor Relations to PSMT.pdf · PriceSmart Investor Relations December 2016. 2 Forward Looking Statements ... although we have begun to offer limited online shopping

48%52%

9

Differentiated Merchandising Strategy

Consistent Brand Management

Successful Private Label Business Treasure Hunt Concept Drives Avg. Ticket

Multi-Sourcing / Multi-Category

53%

27%

11%

7%2%

Hardlines

Locally

Sourced

SundriesUS and

Internationally

Sourced

Food

SoftlinesOther

• Average of 2,200 SKUs per club

• 40 - 50% imported brands

• ~11.5% of sales

Picture 3

Sales Breakdown

Brand 4

Picture 3 Picture 3

Page 10: PriceSmart Investor Relations to PSMT.pdf · PriceSmart Investor Relations December 2016. 2 Forward Looking Statements ... although we have begun to offer limited online shopping

10

Generating Membership Value and Loyalty

Membership Type

Membership Growth

Facts Description

13.0

8.010.0

16.1 16.013.5

7.9

25.7

0.475

80

85

90

95

100

2008 2009 2010 2011 2012 2013 2014 2015 2016

0.0

5.0

10.0

15.0

20.0

25.0

30.0

Total Membership Growth Renewal Rate

Targets higher income and upper-middle class

families

Over 2.8MM total cardholders

1.5MM total membership accounts

86% annual renewal rate (excluding Colombia)

Offers co-branded credit card in nearly all of the

Company’s markets at reduced or zero annual fee

Diamond

94% of Accounts

2.6MM cards

1.4MM membership

accounts

Annual fee of $35 (most

markets)

Business

6% of Accounts

0.2MM cards

0.1MM membership

accounts

Annual fee of $30 plus $10

for add-on memberships

Platinum

(Costa Rica)

Introduced in Oct. 2012

Annual fee of $75 with

2% rebate up to $500

Considering additional

country inclusions in

FY2017

Membership Growth (%) Renewal Rate (%)

Open 3 clubs

in Colombia

Note: 2016 Membership growth without Colombia: 5.4%

Page 11: PriceSmart Investor Relations to PSMT.pdf · PriceSmart Investor Relations December 2016. 2 Forward Looking Statements ... although we have begun to offer limited online shopping

Current Business Update

Page 12: PriceSmart Investor Relations to PSMT.pdf · PriceSmart Investor Relations December 2016. 2 Forward Looking Statements ... although we have begun to offer limited online shopping

Recent Financial Performance

For the Period Ending November 30, 2016:

― Net warehouse club sales increased 3.7% over the comparable prior year period.

― Membership income for Q1 increased 2.1% to $11.7 million

Total accounts grew 2.5% to 1,499,667

12-Month Renewal Rate of 82% (86% excluding Colombia)

― Warehouse gross profits as a percent of net warehouse club sales were 15.0%, an

increase of 45 basis points from the same period last year.

― Net income for the first quarter of fiscal year 2017 was $24.9 million, or $0.82 per

diluted share, compared to $23.7 million, or $0.78 per diluted share, in the

comparable prior year period.

― Cash and cash equivalents of $175.4 million

― Total debt of $84.5 million

12

Page 13: PriceSmart Investor Relations to PSMT.pdf · PriceSmart Investor Relations December 2016. 2 Forward Looking Statements ... although we have begun to offer limited online shopping

Colombia Challenges

The devaluation of Colombia peso (COP) has

had a measurable effect on the consolidated

financial results of the Company

― Imported merchandise price increases impacts

demand

― Sales and Membership results are translated to fewer

US dollars

― US$ Sales declined 16% from last fiscal year

PriceSmart views Colombia as a very good

market for the Company in the long-term:

― We have been willing to accept lower margins

during this time of currency volatility to build

our business.

― Sourcing an increasing number of high quality

products within Colombia at a good value.

Locally sourced merchandise sales grew 5.3% in

Q1 (in COP)

― New member sign-ups at 3 of the Colombia

clubs were the highest of any of our clubs in

Q1.

― Expansion of warehouse club in Barranquilla

includes the addition of a parking deck.

― Colombia warehouse club #7 (Chia, north of

Bogota) opened in September

13

0

500

1000

1500

2000

2500

3000

3500

4000

AU

G

SE

P

OC

T

NO

V

DE

C

JAN

FE

B

MA

R

AP

R

MA

Y

JUN

JUL

AU

G

SE

P

OC

T

NO

V

DE

C

JAN

FE

B

MA

R

AP

R

COP to USD

FY2015 FY2016

Page 14: PriceSmart Investor Relations to PSMT.pdf · PriceSmart Investor Relations December 2016. 2 Forward Looking Statements ... although we have begun to offer limited online shopping

E-Commerce Platform Enhancement

Colombia

14

Current Investments / Focus Areas

Distribution Network and Capabilities

Warehouse Club Capacity and Growth

Page 15: PriceSmart Investor Relations to PSMT.pdf · PriceSmart Investor Relations December 2016. 2 Forward Looking Statements ... although we have begun to offer limited online shopping

15

Well-Developed Distribution Network

Five DC’s in North America, Costa Rica, Colombia,

Trinidad and Panama for imported merchandise

― Totaling approximately 450,000 square feet

― One DC located Mexico City to reduce cross-

border tariffs for certain items

― Costa Rica, Colombia, and Panama DC’s

enable direct shipments from suppliers

Core competency of international shipping and local

import logistics expertise

Managed sourcing logistics from over 20 countries

Executes over 20,000 ocean-container shipments

annually

Staff of 250 dedicated logistics associates in 13

countries

Recently announced the planned acquisition of

build-to-suit distribution center in Miami for

improved efficiency and long-term stability

Key Facts Distribution Network

USVI (1)

Barbados (1) Aruba (1)

Colombia (6)

Panama (5)Costa Rica (6)

Guatemala (3)

EL Salvador (2)Nicaragua (2)

Honduras (3)

Trinidad (4)

Dominican

Republic (3)

Jamaica (1)

Other / Regional DCsPrimary DC

Page 16: PriceSmart Investor Relations to PSMT.pdf · PriceSmart Investor Relations December 2016. 2 Forward Looking Statements ... although we have begun to offer limited online shopping

Warehouse Club Growth

Newest warehouse club, #7 in Colombia,

opened at the start of FY2017

― September 1, 2016 opening

Looking to expand existing warehouse

clubs where the site allows for expansion

― Barranquilla, Colombia

Capital investment expected to be

approximately $130M in FY17.

16

Chia, Colombia

Barranquilla, Colombia

Page 17: PriceSmart Investor Relations to PSMT.pdf · PriceSmart Investor Relations December 2016. 2 Forward Looking Statements ... although we have begun to offer limited online shopping

E-Commerce: www.pricesmart.com

17

Page 18: PriceSmart Investor Relations to PSMT.pdf · PriceSmart Investor Relations December 2016. 2 Forward Looking Statements ... although we have begun to offer limited online shopping

Appendix

Page 19: PriceSmart Investor Relations to PSMT.pdf · PriceSmart Investor Relations December 2016. 2 Forward Looking Statements ... although we have begun to offer limited online shopping

19

Historical Growth Performance

$Bn

Net Warehouse Club Sales (1)

1.1 1.2 1.41.7

2.02.2

2.42.7 2.8

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2008 2009 2010 2011 2012 2013 2014 2015 2016

$MM

Total Membership Income & Accounts (1)

16 18 20 2327

3438

44 46

0.6 0.7 0.7 0.8

1.0 1.1 1.2

1.5 1.5

0.0

1.0

2.0

0

10

20

30

40

50

200820092010201120122013201420152016

MM

Membership Fee Income Membership Accounts

# Warehouse Clubs

Total Units (1)

25 26 27 29 29 31 3337 38

0

10

20

30

40

50

2008 2009 2010 2011 2012 2013 2014 2015 2016

Notes: (1) Fiscal years

%

Same Store Sales Growth (1)

20.1

8.7 8.2

18.114.5

9

4.82.7 2.2

0

10

20

30

2008 2009 2010 2011 2012 2013 2014 2015 2016

Page 20: PriceSmart Investor Relations to PSMT.pdf · PriceSmart Investor Relations December 2016. 2 Forward Looking Statements ... although we have begun to offer limited online shopping

20

Historical Earnings Performance

% %

EBITDA Margin (1)(2) EBIT Margin (1)(2)

%

ROIC (1)(3)

5.4 5.86.4 6.4 6.4 6.6 6.6 6.5 6.3

0

2

4

6

8

2008 2009 2010 2011 2012 2013 2014 2015 2016

4.44.7

5.3 5.2 5.35.6 5.5

5.3

4.8

4

5

6

2008 2009 2010 2011 2012 2013 2014 2015 2016

13.9 14.4 13.915.6 16.8 18.4 17.0 16.2 17.6

0

5

10

15

20

25

2008 2009 2010 2011 2012 2013 2014 2015 2016

Notes: (1) Fiscal years

(2) Excludes asset impairment and closure costs and provisions for pending litigation

(3) ROIC = EBIT * (1 - Effective Tax Rate) / (Net PPE + Net Working Capital + Goodwill)

$

Diluted EPS (1)

1.29 1.43 1.652.07 2.24

2.783.07 2.95 2.92

0

1

2

3

4

2008 2009 2010 2011 2012 2013 2014 2015 2016

Page 21: PriceSmart Investor Relations to PSMT.pdf · PriceSmart Investor Relations December 2016. 2 Forward Looking Statements ... although we have begun to offer limited online shopping

21

Adjusted EBITDA Reconciliation