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YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.04pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.08pp
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.17pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
protests+3
adversely+2
negatively+2
interruption+2
negative+2
Positive rising
profitability+2
able+1
achieve+1
Risk Factors (Item 1A)
10,824 words
Item 1A. Risk Factors
In evaluating the Company’s business, you should consider the following discussion of risk factors, in addition to other information contained in this report and in the Company’s other public filings with the U.S. Securities and Exchange Commission. Any such risks could materially and adversely affect our business, results of operations, cash flow, financial condition, liquidity and prospects. However, the risks described below are not the only risks facing us. Our business operations could also be affected by additional factors that apply to all companies operating in the U.S. and globally. Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially and adversely affect our business, financial condition, results of operations, cash flow and prospects.
External Factors that Could Adversely Affect Us
Our financial performance is dependent on international operations, which exposes us to various risks.
Our international operations account for nearly all of our total revenues. Our financial performance is subject to risks inherent in operating and expanding our international membership warehouse club business, which include:
• changes in, and inconsistent enforcement of, laws and regulations, including those related to tariffs and taxes;
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
challenges+3
negative+1
adverse+1
delays+1
disruptions+1
Positive rising
able+2
successful+1
exciting+1
enhancing+1
beautiful+1
MD&A (Item 7)
11,801 words
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K.
Overview
PriceSmart, headquartered in San Diego , California, owns and operates U.S. -style membership shopping warehouse clubs in Latin America and the Caribbean , selling high quality merchandise and services at low prices to our Members. We operate 56 warehouse clubs in 12 countries and one U.S. territory (ten in Colombia; nine in Costa Rica ; seven each in Panama and Guatemala; five in Dominican Republic ; four each in Trinidad and El Salvador; three in Honduras; two each in Nicaragua and Jamaica; and one each in Aruba, Barbados and the United States Virgin Islands). Additionally, the Company plans to open one new warehouse club in La Romana, Dominican Republic in the spring of 2026, and one warehouse club in Montego Bay and one on South Camp Road, Jamaica in the summer and fall of 2026, respectively. Once these three new clubs are open, we will operate 59 warehouse clubs in total. Additionally, we are continuing to advance our planned expansion into Chile, which we have identified as a potential market for multiple PriceSmart warehouse clubs. Our corporate headquarters, U.S. buying operations and regional distribution centers are located primarily in the United States. Our operating segments are the United States, Central America, the Caribbean and Colombia. All intercompany balances and transactions have been eliminated in consolidation.
• the imposition of foreign and domestic governmental controls, including expropriation risks;
• natural disasters;
• trade restrictions, including import-export quotas and general restrictions on importation;
• difficulty and costs associated with international sales and the administration of an international merchandising business;
• crime and security concerns that can adversely affect the economies of the countries in which we operate and which require us to incur additional costs to provide additional security at our warehouse clubs;
• political instability, such as civil unrest in Panama during the third quarter of fiscal year 2025 and in Colombia in 2022 and 2021 as well as anti-government protests in Panama and Guatemala in 2023;
• product registration, permitting and regulatory compliance;
• volatility in foreign currency exchange rates;
• limitations on our ability to convert foreign currencies;
• general economic and business conditions;
• pandemics; and
• interruption of our supply chain.
These risks may result in disruption to our sales, banking transactions, operations and merchandise shipments, any of which could have a material adverse effect on our business and results of operations. Fluctuations in exchange rates for foreign currencies have and could continue to reduce the U.S. dollar value of sales, earnings and cash flows we receive from our non-U.S. markets, increase our supply costs (as measured in U.S. dollars) in those markets, negatively impact our competitiveness in those markets or otherwise adversely impact our business results or financial condition. From time to time, we have experienced a lack of availability of U.S. dollars in certain markets (U.S. dollar illiquidity). This impedes our ability to convert local currencies obtained through merchandise sales into U.S. dollars to settle the U.S. dollar liabilities associated with our imported products or otherwise fund our operations. This illiquidity also increases our foreign exchange exposure to any devaluation of the local currency relative to the U.S. dollar. For more information about foreign currency exchange rate risks and risks associated with the lack of U.S. dollar availability, see "Financial and Accounting Risks – We are subject to volatility in foreign currency exchange rates and limits on our ability to convert foreign currencies into U.S. dollars."
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Political and other factors in each of our markets may have significant effects on our business. For example, protestors set up roadblocks in Panama during October and November 2023 as a reaction to an agreement between the Panamanian government and a mining company, disrupting traffic to our clubs throughout most of the market. In the third quarter of fiscal year 2025, Panama once again experienced widespread protests and social unrestagainst the government. Roadblocks in Guatemala in October 2023 related to election protests also limited access to certain of our warehouse clubs. Civil unrest in Colombia in response to tax reform and austerity measures paralyzed significant portions of the country’s infrastructure during the third quarter of fiscal year 2021.
Negative economic conditions created or exacerbated by inflation and higher interest rates could adversely impact our business in various respects.
A slowdown in the economies of one or more of the countries in which we operate or adverse changes in economic conditions affecting discretionary consumer spending could adversely affect consumer demand for the products we sell, change the mix of products we sell to a mix with a lower average gross margin, cause a slowdown in discretionary purchases of goods, adversely affect our net sales or result in slower inventory turnover and greatermarkdowns of inventory.
Sales of food and groceries are especially sensitive to general changes in economic conditions. Economic conditions in our markets can be adversely affected by contractions in financial markets, increased governmental ownership or regulation of the economy, higher interest rates, high rates of inflation or deflation, higher fuel prices, increased barriers to entry such as higher tariffs and taxes, and other macroeconomic factors.
The economic factors that affect our operations may also adversely affect the operations of our suppliers, which can result in an increase in the cost to us of the goods we sell to our customers or, in more extreme cases, in certain suppliers not producing goods in the volume typically available to us.
We are vulnerable to changes in political and economic conditions, including the effects of tariffs and/or international trade wars and disruptions to remittances.
The U.S. government has implemented significant tariff measures, including a baseline tariff of 10% on products from all countries and higher rates targeting specific countries such as China, Vietnam, and the European Union. The U.S. and/or countries into which we import merchandise and equipment may, in the future, adjust and/or impose new quotas, duties, tariffs or reciprocal tariffs or other restrictions which may affect our operations and our ability to supply merchandise at reasonable prices at our warehouse clubs. This might result in our having to increase prices to our Members to maintain our target margins or our not being able to obtain sufficient supplies of certain products, either of which could adversely affect our sales and profitability. The ultimate impact of any tariffs will depend on various factors, including how long such tariffs remain in place, the ultimate levels of such tariffs and how other countries respond to the U.S. tariffs. Our Miami Distribution Center, which operates within a Free Trade Zone ("FTZ"), helps us avoid some of the economic risks posed by U.S. tariffs, but the use of the FTZ does not fully mitigate the impact of duties on items we purchase from U.S. vendors that are either imported finished goods or that contain significant amounts of imported inputs. We may also choose to re-route merchandise directly from the country of origin directly to the markets where we have warehouse clubs to bypass the impact of U.S. tariffs. However, if we are unable to mitigate tariff-related risks through supply chain adjustments, pricing strategies, or other measures, our financial performance and growth prospects could be negatively affected.
Remittances make up a significant portion of GDP in certain markets, including Guatemala, El Salvador, Nicaragua and Honduras. A remittance is a transfer of money by a foreign worker located in the United States to an individual or family in his or her home country. If deportations of foreign workers from the United States increases, either due to changes in immigration policy, enforcement actions, or legal challenges, it could result in fewer remittances. Additionally, the financial strain of relocation and reintegration of these workers in their home countries may further diminish their disposable income and their ability to provide financial support. A decline in remittance flows could have a direct negative impact on the economies of several of the Latin American nations where we operate, which rely on remittances as a key source of income and poverty alleviation for millions of families. Starting in January 2026, the U.S. government will impose a 1% tax on anyone sending money abroad. With no minimum transaction limit, even small transfers may be taxed, meaning that this tax could reduce net remittances received in our markets from the U.S.
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Our profitability is vulnerable to cost increases.
Future increases in costs, such as the cost of merchandise, wage and benefits costs, shipping rates, freight costs, fuel costs, utilities and other store occupancy costs, may reduce our profitability. We seek to adjust our product sales pricing, operate more efficiently, and increase our comparable store net sales to help offset inflation as well as currency rate changes, changes in tax rates or in the methods used to calculate or collect taxes on our sales or income and other factors that can increase costs. We might not be able to adjust prices, operate more efficiently or increase our comparable store net sales in the future to a great enough extent to offset increased costs. Although we have seen recent inflationary pressures subsiding, substantial product cost increases and commodity price increases have and could continue to impact our financial results and could lead to reduced sales, fewer units sold, and/or margin pressure. Please see Part II. “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of the effect of currency rate changes, inflation and other economic factors on our operations.
We face significant competition.
Our international warehouse club business competes with exporters, importers, wholesalers, local retailers and trading companies in various international markets. Some of our competitors have greater resources, buying power and name recognition than we have. We also face competition from online retailers who serve our markets, and we expect that this type of competition will grow and intensify in the future.
In the countries in which we operate and in Chile, we do not currently face direct competition from membership warehouse club operators. However, we do face competition from various retail formats such as hypermarkets, supermarkets, cash and carry outlets, home improvement centers, electronic retailers and specialty stores, including those within Latin America that are owned and operated by large U.S. and international retailers, including Walmart Inc. in Central America and Grupo Éxito in Colombia and Cencosud in South America. We have noted that certain retailers are making investments in upgrading their locations or opening new stores which may result in increased competition. Further, it is possible that other warehouse club operators may decide to enter our markets and compete more directly with us in a similar warehouse club format. Our ability to operate profitably in our markets, particularly small markets, may be adversely affected by the existence or entry of competing warehouse clubs or discount retailers.
We compete in a variety of ways, including the value and prices at which we sell our merchandise, merchandise selection and availability, services offered to Members, location, store hours, safety protocols and the shopping convenience and overall shopping experience we offer. We may be required to implement price reductions to remain competitive if any of our competitors reduce prices in any of our markets. In response to the increasing threat associated with online retailers, we are making technology investments, which may result in increases in the use of cash and reduced profitability in the near term.
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.
Although online sales are currently a smaller proportion of total sales in our markets for the types of merchandise we offer than in the U.S., online shopping is becoming more prevalent in our markets as we and our competitors begin to offer more opportunities for online shopping and as delivery systems in our markets improve. While major international online retailers have not established a significant penetration in any of our markets, AmazonGlobal continues to expand its online marketplace and ships into most of our markets, and other regional online retailers, such as MercadoLibre, have continued to increase their presence in our markets. We have a strategic partnership with Rappi in Colombia that allows our Members to use Rappi's platform to place online orders, but we do not have this arrangement with other online retailers. It is possible that Amazon will increase its presence or that other major international retailers, or smaller regional companies will increase their penetration of online shopping. In either case, sales through our online platform or warehouse clubs could be adversely affected.
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We are exposed to significant weather events and other natural disaster risks that might not be adequately compensated by insurance, and we are susceptible to the long-term impacts of climate change.
Our operations are subject to volatile weather conditions and natural disasters, such as earthquakes, hurricanes and volcanic activity, which occur periodically in the regions in which our warehouse clubs and other facilities are located. Natural disasters could result in physical damage to, or the complete loss of, one or more of our properties, the closure of one or more clubs or distribution centers, limitations on store or club operating hours, the lack of an adequate work force in a market, the inability of customers and employees to reach our clubs, extended power outages and spoilage of our fresh and frozen food products, the unavailability of our digital platforms to our customers, disruption in the supply of products or increases in the costs of procuring products. For example, in early fiscal year 2018, operations at our USVI warehouse club were adversely affected by Hurricanes Irma and Maria. The warehouse club was closed for nine days, and after re-opening, the warehouse club operated with limited hours for 16 days due to a government-imposed curfew. Damaged and destroyed roads restricted traffic flow, adversely affecting customer access for some time after the hurricane. Future losses from business interruption may not be adequately compensated by insurance and could have a material adverse effect on our business, financial condition, and results of operations.
Furthermore, the long-term impacts of climate change, whether involving physical risks (such as extreme weather conditions, drought, or rising sea levels) or transition risks (such as regulatory or technology changes) are expected to be widespread and unpredictable. Physical risks include extreme storms that damage or destroy our buildings and inventory or interrupt our business operations and supply chain and temperature changes that increase the heating and cooling costs at clubs and distribution and fulfillment centers. We also may experience changes in energy and commodity prices driven by climate change as well as new regulatory requirements resulting in higher compliance and operational costs, including compliance with newly adopted legislation in California that will require certain companies that do business in California, including PriceSmart, to report annually on their direct Scope 1 and 2 emissions and Scope 3 value chain emissions, and to prepare a report disclosing their climate-related financial risk, as well as measures to reduce and adapt to that risk.
We face difficulties in the shipment of, and risks inherent in the importation of, merchandise to our warehouse clubs.
Our warehouse clubs typically import nearly half or more of the merchandise that they sell. This merchandise originates from various countries and is transported over long distances, over water and over land, which results in:
• substantial lead times needed between the procurement and delivery of products, thus complicating merchandising and inventory controls;
• the possible loss of products due to theft or potential damage to, or destruction of, ships or containers delivering goods;
• product markdowns due to the prohibitive cost of returning merchandise upon importation;
• product registration, tariffs, customs and shipping regulation issues in the locations we ship to and from;
• the possibility of business interruption due to transportation and port strikes;
• ocean freight and duty costs; and
• possible governmental restrictions on the importation of merchandise.
Civil unrest in certain countries in which we operate may adversely affect the flow of goods through those countries. For example, protestors set up roadblocks in Panama during October and November 2023 as a reaction to an agreement between the Panamanian government and a mining company, disrupting traffic to our clubs throughout most of the market. In the third quarter of fiscal year 2025, Panama once again experienced widespread protests and social unrestagainst the government. Roadblocks in Guatemala in October 2023 relating to election protests also limited access to certain of our warehouse clubs. Civil unrest in Colombia in response to tax reform and austerity measures paralyzed significant portions of the country’s infrastructure as roadblocks and riots disrupted normal economic activity during the third quarter of fiscal year 2021.
Moreover, each country in which we operate has different governmental rules and regulations regarding the importation of foreign products. Changes to the rules and regulations governing the importation of merchandise may result in additional delays, costs or barriers in our deliveries of products to our warehouse clubs or may affect the type of products we select to import. For example, in May 2023, disputes with Nicaraguan customs and tax authorities resulted in delays in the issuance of our importation clearance and general delays in the customs inspection process. These delays resulted in our being unable to import merchandise into Nicaragua for several weeks in June 2023.
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In addition, only a limited number of transportation companies service our regions. The inability or failure of one or more key transportation companies to provide transportation services to us, any collusion among the transportation companies regarding shipping prices or terms, changes in the regulations that govern shipping tariffs or the importation of products, or any other disruption to our ability to import our merchandise could have a material adverse effect on our business and results of operations.
Any significant interruption in the operations of our distribution centers or supply chain network could disrupt our ability to provide adequate supplies of merchandise to our warehouse clubs.
We rely on our Miami distribution center, our regional distribution center and several smaller local distribution centers to supply merchandise to our warehouse clubs. Any interruption or failure in the operation of our distribution centers, such as disruptions due to fire, severe weather or other catastrophic events, cyberattacks, network or power outages, labor shortages or disagreements, shipping or infrastructure problems, food safety concerns, integration of new distribution centers, inability of our new distribution centers to perform as expected or contractual disputes with third-party service providers could result in increased expenses and adversely impact our ability to distribute products to our warehouse clubs. Such interruptions could result in lost sales and a loss of Member loyalty, as well as increased costs from third-party service providers.
In addition, unexpecteddelays in deliveries from vendors or increases in distribution and transportation costs (including through increased labor or fuel costs) could have a material adverse effect on our financial condition, results of operations and cash flows. Labor shortages, work stoppages or other disruptions affecting our supply chain also could negatively affect our business.
We are subject to payment-related risks, including risks to the security of payment card information.
We accept payments using an increasing variety of methods, including cash, checks, wire transfers, our co-branded credit cards and a variety of other credit and debit cards. Our operations, like those of most retailers, require the transmission of information associated with cashless payments. As we offer new payment options to our Members, we may be subject to additional rules, regulations and compliance requirements, along with the risk of higher fraudlosses. For certain payment methods, we pay interchange and other related card acceptance fees, along with additional transaction processing fees. We rely on third parties to provide secure and reliable payment transaction processing services, including the processing of credit and debit cards, and it could disrupt our business if these companies become unwilling or unable to provide these services to us. We are also subject to fee increases by these service providers.
We are also subject to payment card association and network operating rules, including data security rules, certification requirements and rules governing electronic funds transfers, which could change over time. If we fail to comply with these rules or transaction processing requirements, we may not be able to accept certain payment methods. In addition, if our internal systems are breached or compromised, we may be liable for banks’ compromised card re-issuance costs, we may be subject to fines and higher transaction fees and lose our ability to accept credit and/or debit card payments from our Members, and our business and operating results could be adversely affected. Failures or disruptions in data communication and transfer services also could significantly impact our ability to transact payments to vendors and process credit and debit card transactions. Lastly, we or our customers may experience “spoofing” transactions, particularly with respect to wire transfers, which could cause us to make payments to impostor vendors or result in our not receiving timely payment from customers for merchandise we have sold.
We face the possibility of operational interruptions related to union work stoppages .
We currently have unionized employees in three of our markets (Trinidad, Barbados and Panama), and our operations depend on shipping, trucking, ports and other elements of the supply chain that often rely on unionized labor. A work stoppage or other limitation on operations from union or other labor-related matters could occur for any number of reasons, including as a result of disputes under existing collective bargaining agreements with labor unions or in connection with negotiation of new collective bargaining agreements. For example, while it did not impact our export activities, we experienced a brief disruption to the flow of imported merchandise into our Miami distribution center operations because of the U.S. dockworkers strike in October 2024. A lengthy work stoppage or significant limitation on operations could have a substantial adverse effect on our financial condition and results of operations.
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Risks Associated with Our Business Strategy and Operations
Any failure by us to manage our widely dispersed operations could adversely affect our business.
As of August 31, 2025, we had 56 warehouse clubs in operation, located in 12 countries and one U.S. territory (ten in Colombia; nine in Costa Rica ; seven each in Panama and Guatemala; five in Dominican Republic ; four each in Trinidad and El Salvador; three in Honduras; two each in Nicaragua and Jamaica; and one each in Aruba, Barbados and the United States Virgin Islands) . We need to continually evaluate the adequacy of our existing infrastructure, systems and procedures, financial controls, operating controls, inventory, and safety controls and make upgrades from time to time. Moreover, we are required to continually analyze the sufficiency of our inventory distribution channels and systems and may require additional or expanded facilities in order to support our operations. We may not adequately anticipate all the changing demands that will be imposed on these systems. Any failure of our systems or our inability to effectively update our internal systems or procedures as required could have a material adverse effect on our business, financial condition and results of operations.
We depend on maintaining and expanding our membership base, and any harm to our relationship with our Members could have a material adverse effect on our business, net sales and results of operations.
Membership has been a basic operating characteristic in the warehouse club industry, beginning over 49 years ago at Price Club, the first membership warehouse club business. We believe membership promotes Member loyalty, and membership fees contribute to our ability to operate our business on lower margins than conventional retailers and wholesalers. The extent to which we achieve growth in our membership base and sustain high renewal rates materially influences our profitability. Further, our net sales are directly affected by the number of membership cardholders, the frequency with which our Members shop at our clubs and online and the amount they spend, which means the loyalty and enthusiasm of our Members directly impacts our net sales and operating income. Accordingly, anything that would harm our relationship with our existing Members or our ability to continue to attract new Members could materially adversely affect our net sales, membership fee income and results of operations.
Factors that could adversely affect our relationship with our Members include: our failure to provide good value to Members on the goods and services we offer; our failure to provide the expected quality of merchandise; our failure to offer the right mix of merchandise; events that harm our reputation or the reputation of our “ Member’s Selection ® ” brand; our failure to provide convenience online and in-store shopping; increases to our membership fees; and increased competition.
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.
Our success depends, in part, on our ability to identify and respond to trends in demographics and changes in consumer preferences for merchandise. It is difficult to consistently and successfully predict the products and services our Members will demand. Failure to timely identify or respond effectively to changing consumer tastes, preferences or spending patterns could adversely affect our relationship with our Members, the demand for our products and our market share. If we are not successful at predicting sales trends and adjusting purchases accordingly, we might have too much or too little inventory of certain products. If we buy too much of a product, we might be required to reduce prices or otherwise liquidate the excess inventory, which could have an adverse effect on margins (net sales less merchandise costs) and operating income. For example, we took significant markdowns in the third quarter of fiscal year 2022 when we had excessive amounts of slow-moving inventory because of changing consumer preferences as Members began to resume buying patterns similar to our pre-pandemic sales mix. If we do not have sufficient quantities of a popular product, we might lose sales and profits we otherwise could have made. As our customers expect a more personalized experience, our ability to collect, use, retain, and protect relevant customer data is important to our ability to effectively meet their expectations. Our ability to collect and use that data, however, is subject to a number of external factors, including the impact of legislation or regulations governing data privacy, data-driven technologies such as artificial intelligence, and data security, as well as customer expectations around data collection, retention, and use.
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Future sales growth depends, in part, on our ability to successfully open new warehouse clubs in our existing and new markets .
Sales growth at existing warehouse clubs can be impacted by, among other things, the physical limitations of the warehouse clubs, which restrict the amount of merchandise that can be safely stored and displayed in the warehouse clubs and the number of Members that can be accommodated during business hours. As a result, sales growth will depend, in part, upon our acquiring suitable sites for additional warehouse clubs. Land for purchase or lease, or buildings to be leased, in the size and locations in those markets that would be suitable for new PriceSmart warehouse clubs may be limited in number or not be available or financially feasible. In this regard, we compete with other retailers and businesses for suitable locations. Additionally, local land use, environmental and other regulations restricting the construction and operation of our warehouse clubs and distribution facilities, as well as local community actions opposed to the location of our warehouse clubs or distribution facilities at specific sites, may impact our ability to find suitable locations, and increase the cost of constructing, leasing and operating our warehouse clubs and distribution facilities. We have experienced these limitations in Colombia, primarily in Bogotá, and in some of our other existing markets, which has negatively affected our growth rates in those markets. Limitations on the availability of appropriate sites for new warehouse clubs and distribution facilities in the areas targeted by us could have a material adverse effect on the future growth of PriceSmart.
New warehouse club openings may negatively impact our financial results in the short-term due to the effect of opening costs and lower sales and contribution to overall profitability during the initial period following opening. New clubs typically build their sales volume and their customer base over time and, as a result, generally have lower margins and higher operating expenses, as a percentage of net sales, than our more mature clubs. New clubs may not achieve sustained sales and operating levels consistent with our more mature store base on a timely basis or at all. In addition, in some cases, we have more than one warehouse club in a single metropolitan area, and we may open new warehouse clubs in certain areas where we already have warehouse clubs. A new warehouse club in an area already served by existing warehouse clubs may draw Members away from existing warehouse clubs and adversely affect comparable store sales performance. We operate in relatively small markets. Given the growth of our sales over the past few years, market saturation could impact the rate of future sales growth.
We intend to open warehouse clubs in new markets in the future, including Chile. The risks associated with entering a new market include potential difficulties in attracting Members due to a lack of familiarity with us and our lack of familiarity with local Member preferences. In addition, entry into new markets may bring us into competition with new competitors or with existing competitors with a large, established market presence. As a result, our new warehouse clubs might not be successful in new markets.
Failure to grow our e-commerce business through the integration of physical and digital retail channels and the investments we are making to develop a robust e-commerce platform could materially adversely affect our market position, net sales and/or financial performance.
The retail business is quickly evolving, and consumers are increasingly embracing shopping online and through mobile commerce applications. As a result, the portion of total consumer expenditures with all retailers and wholesale clubs occurring online and through mobile commerce applications is increasing, and the pace of this increase could accelerate. As demonstrated by our launch of our PriceSmart.com and our mobile app and the upgrade of our point-of-sale system, we are increasing our investments in e-commerce, technology and other customer initiatives. The success of our e-commerce initiative continues to depend in large measure on our ability to build and deliver a seamless shopping experience across the physical and digital retail channels. Operating an e-commerce platform and fulfillment of online orders is a complex undertaking, and there is no guarantee that the resources we have applied to this effort will result in increased revenues or improved operating performance. If we do not maintain a successful and relevant omni-channel experience for our Members, our ability to compete and our results of operations could be adversely affected. In addition, a greater concentration of e-commerce sales could result in a reduction in the amount of traffic in our warehouse clubs, which would, in turn, reduce the opportunities for cross-club sales of merchandise that such traffic creates and could reduce our sales within our clubs, materially affecting the financial performance of the physical retail side of our operations. In addition, our investments in e-commerce and technology initiatives will adversely impact our short-term financial performance, and our failure to realize the benefits of these investments may adversely impact our financial performance over the longer term.
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We are subject to risks associated with our dependence on third-party suppliers and service providers, and we have no assurances of continued supply, pricing or access to new merchandise.
We have important ongoing relationships with various third-party suppliers of services and merchandise. These include, but are not limited to, local, regional, and international merchandise suppliers, information technology suppliers, equipment suppliers, financial institutions, credit card issuers and processors, and lessors. Significant changes in the relationships or the agreements that govern the terms through which business is conducted could have a material adverse effect on our business, financial condition and results of operations. We have no assurances of continued supply, pricing or access to new merchandise, and any supplier could at any time change the terms upon which it sells to us or discontinue selling to us. One of our significant suppliers operates a warehouse club business and may in the future seek to compete with us in some of our markets. In addition, the manner in which we acquire merchandise, either directly from the supplier’s parent company or through a local subsidiary or distributor, is subject to change from time to time based on changes initiated by the supplier and for reasons beyond our control. Significant changes or disruptions in how we acquire merchandise from these suppliers could negatively affect our access to such merchandise, as well as the cost of merchandise to us and hence our Members, which could have a material adverse effect on our business and results of operations.
Our failure to maintain our brand and reputation could adversely affect our results of operations.
Our success depends on our ability to continue to preserve and enhance our brand and reputation. Damage to the PriceSmart brand could adversely impact merchandise sales, diminish Member trust, reduce Member renewal rates and impair our ability to add new Members. A failure to maintain and enhance our reputation also could lead to loss of new opportunities or employee retention and recruiting difficulties. Negativeincidents, such as a data breach or product recall, can quickly erode trust and confidence, particularly if they result in adverse publicity, governmental investigations or litigation. In particular, the propagation of negative publicity on social media, whether merited or not, can have a damaging effect on our business in one or more markets. In addition, we sell many products under our private label “ Member’s Selection ® ” brand. If we do not maintain consistent product quality of our “ Member’s Selection ® ” products, which generally carry higher margins than national brand products carried in our warehouse clubs, our net warehouse sales and gross margin results could be adversely affected and Member loyalty could be harmed. Also, accidents or personal injuries that sometimes occur in our facilities, such as a Member slipping and falling or injuries caused by product falling from a rack, could result in negative publicity or otherwise damage the Company's reputation.
We face the risk of exposure to product liability claims, a product recall and adverse publicity.
If our merchandise, such as food and prepared food products for human consumption, medication, children's products, pet products and durable goods, do not meet or are perceived not to meet applicable safety standards or our Members’ expectations regarding safety, we could experience lost sales, increased costs, litigation or reputational harm. The sale of these items exposes us to the risk of product liability claims, a product recall and adverse publicity. The sale of these items involves the risk of illness or injury to our Members. Such illnesses or injuries could result from tampering by unauthorized third parties, product contamination or spoilage, including the presence of foreign objects, substances, chemicals, other agents, or residues introduced during the growing, manufacturing, storage, handling and transportation phases, or faulty design. In particular, we may inadvertently redistribute food products or prepare food products that are contaminated, which may result in illness, injury or death if the contaminants are not eliminated by processing at the food service or consumer level. We package and market fresh produce products within our markets, so we may be exposed to additional risk of product liability and adverse publicity if those fresh food products are contaminated, which may result in illness, injury or death if the contaminants are not eliminated by processing at our packaging service centers.
We generally seek contractual indemnification and proof of insurance from our major suppliers and carry product liability insurance for all products we sell to or package for our Members. However, if we do not have adequate insurance or contractual indemnification available, product liability claims relating to products that are contaminated or otherwise harmful could have a material adverse effect on our ability to successfully market our products and on our financial condition and results of operations. In addition, even if a product liability claim is not successful or is not fully pursued, the negative publicity surrounding a product recall or any assertion that our products caused illness or injury could have a material adverse effect on our reputation with existing and potential Members and on our business, financial condition and results of operations.
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We rely extensively on computer systems to process transactions, summarize results and manage our business. Failure to adequately maintain our systems, or disruptions to them, could harm our business and adversely affect our results of operations .
Given the high volume of individual transactions we process each year, we seek to maintain the uninterrupted operation of our business-critical computer systems. Our computer systems, including back-up systems, are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, security breaches, catastrophic events such as fires, earthquakes, tornadoes and hurricanes, and errors by our employees. Our information systems are not fully redundant, and our disaster recovery planning cannot account for all eventualities. If our computer systems and backup systems are damaged or fail to function properly, we may have to make significant investments to repair or replace them, and we may sufferinterruptions in our operations in the interim. Any material interruption in our computer systems could have a material adverse effect on our business or results of operations.
We depend on third-party service providers to support transaction and payment processing, data security and other technology services. Any interruption in the operations of these service providers could, in turn, have a material adverse effect on us. For example, in 2022, a third-party provider supporting our point-of-sale system became insolvent, requiring us to quickly develop and implement short-term workarounds and delaying our migration to a cloud-based system integrating in-store and online functionality.
From time to time, we make technology investments to improve or replace key information processes and systems that support our business. The risk of system disruption increases when changes are made to these processes and systems. Targeting the wrongopportunities, failing to make the right investments, or making an investment commitment significantly above or below our needs could result in the loss of our competitive position and adversely impact our financial condition and results of operations. Additionally, the potential problems and interruptions associated with implementing technology initiatives could disrupt or reduce the efficiency of our operations in the short term. These initiatives might not deliver the anticipated benefits, or they may provide them on a delayed schedule or at a higher cost. For example, we are in the midst of migrating to the Toshiba Elera™ point-of-sale system and if we cannot successfully implement this product, or experience significant delays, it may jeopardize our operations or result in additional costs.
Not updating our systems on a timely basis could leave us at a disadvantage relative to our competitors. We will be at a competitive disadvantage if, over time, our competitors are more effective than we are in utilizing and integrating rapidly evolving technologies, including artificial intelligence and machine learning. Our current ERP (Enterprise Resource Planning) system is no longer supported by its developer, which could increase the risk of a disruption. In addition, newer versions of some of our other internal systems offered by the vendors, offer greater functionality and reliability that we have not yet implemented. We also continue to rely on other systems we developed internally a number of years ago, and we are in the process of migrating these systems to more industry-standard technologies. Several years ago, we began evaluating options to replace our ERP system. However, we intentionally deferred this project as originally contemplated in order to more thoroughly assess our overall IT landscape. We decided that the risk, cost, and implementation cycle time of a holistic ERP system was not a sound strategy. We instead turned our focus to a coordinated program of upgrading packaged applications and replacing in-house applications with packaged applications designed to improve our capabilities with less risk, and in less time. We are continuing to work on the implementation of a packaged forecast and replenishment system (RELEX) for buying and upgrades to our packaged WMS (Warehouse Management System), TMS (Transportation Management System) and GTM (Global Trade Management) for logistics. We believe these upgrades plus several other projects, such as our point-of-sale system replacement and e-commerce/mobile application upgrade, will modernize our key revenue-generating systems and reduce the risk of disruption. However, if we are not successful with this strategy, we might be required to operate with obsolete technology and face the risk of system disruption, putting us at a disadvantage relative to our competitors.
We have also begun implementing modern package Human Capital Management systems for time & attendance (UKG), core HR functions (Workday), and payroll to replace older applications that rely primarily on internal support. These initiatives might not deliver the anticipated benefits, may do so on a delayed schedule or at a higher cost, or may disrupt our business.
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Any failure by us to maintain the security of the information we hold relating to our Company, Members, employees, and vendors, could damage our reputation with them, disrupt our operations, cause us to incur substantial additional costs, expose us to litigation, and materially affect our operating results.
We receive, retain, and transmit personal information about our Members and employees, and we entrust that information to third-party business associates, including cloud service-providers that perform activities for us. In addition, we and our third-party service providers store and maintain health-related personal information, pharmacy, and medical records in connection with our health and wellness and pharmacy businesses. We also utilize third-party service providers for a variety of reasons, including, without limitation, cloud services, back-office support, and other functions and our online operations depend on the secure transmission of confidential information over public networks, including information used for cashless payments. Each year, computer hackers, cyber terrorists, and others make numerous attempts to access the information stored in companies’ information systems. The use of remote work infrastructure has also increased cybersecurity risk, as remote work continues even post-COVID-19. Additionally, the rapid evolution of artificial intelligence and the integration of machine learning technologies into our internal systems may intensify our cybersecurity risks and create new risks to our business, operations, and financial condition.
The use of data by our business and our business associates is regulated in all our operating countries. Privacy and information-security laws and regulations change, and compliance with them may result in increased costs due to, among other things, system changes and the development of new processes. If we or those with whom we share information fail to comply with these laws and regulations, we could face legal risk as a result of non-compliance.
We or our third-party service providers may be unable to anticipate one or more of the rapidly evolving and increasingly sophisticated means by which computer hackers, cyber terrorists and others may attempt to defeat our security measures or those of our third-party service providers and breach our or our third-party service providers' information systems. Error or malfeasance by our employees or consultants, faulty password management, or other irregularities may result in the defeat of our or our third-party service providers' security measures and a breach of our or our third-party service providers` information systems (whether digital or otherwise). As a result, one or more hackers, cyber terrorists or others might obtain the personal information of Members, employees and vendors that we hold or to which our third-party service providers have access, and we or our third-party service providers may not discover any security breach and loss of information for a significant period of time after the security breach occurs. Our logging capabilities, or those of third parties, are also not always complete or sufficiently detailed, affecting our ability to fully investigate and understand the scope of security events. We, or one of our third-party service providers may also be subject to a ransomware or cyber-extortion attack, which could significantly disrupt our operations. In the enterprise context, ransomware attacks involve restricting access to computer systems or vital data until a ransom is paid.
Any breach of our security measures or those of our third-party service providers and loss of our confidential information, or any failure by us to comply with applicable privacy and information security laws and regulations, could cause us to incur significant costs to protect any Members and/or employees whose personal data was compromised to restore Member and employee confidence in us and to make changes to our information systems and administrative processes to address security issues and compliance with applicable laws and regulations.
In addition, such events could have a material adverse effect on our reputation with our Members, employees, vendors and stockholders, as well as our results of operations, financial condition and liquidity; could result in the release to the public of confidential information about our operations and financial condition and performance; and could result in litigationagainst us or the imposition of penalties or liabilities. Moreover, a security breach could require us to devote significant management resources to address the problems created by the security breach and to expend significant additional resources to further upgrade the security measures that we employ to guard such important personal information againstcyberattacks and other attempts to access such information, resulting in a disruption of our operations.
We regularly reassess these risks in response to the evolving cybersecurity landscape, and any significant changes are promptly communicated to executive management and our Board or Audit Committee. There are no assurances that our cybersecurity risk management program, policies, controls, or procedures will be fully implemented, complied with, or effectively protect our systems and information. We have not identified, and are not aware of, any risks from cybersecurity threats, including as a result of any prior cybersecurity incidents, which have materially affected or are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition. Despite our security measures, there can be no assurance that we, or third parties with whom we interact, will not experience a cybersecurity incident in the future that materially affects us.
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Our use of artificial intelligence in our business or more rapid adoption of artificial intelligence by our competitors could result in harm to our brand and adversely affect our results of operations .
Some of our computer systems currently, and might in the future, incorporate artificial intelligence (“AI”) solutions, including machine learning and generative AI tools that collect, aggregate, and analyze data to assist in the operations of our business. These applications may become increasingly important in our operations over time. This emerging technology presents a number of risks inherent in its use. For example, AI algorithms are based on machine learning and predictive analytics, which can create accuracy issues, unintended biases, and discriminatory outcomes that could harm our brand, reputation, business, or Members. Additionally, any investments we make in AI technologies might not actually make us more efficient. Our competitors or other third parties may incorporate AI into their businesses more rapidly or more successfully than us, which could hinder our ability to compete effectively and adversely affect our results of operations. The technologies underlying AI are rapidly developing, and it is not possible to predict all of the legal, operational or technological risks related to the use of AI. While new AI initiatives, laws, and regulations are emerging and evolving, what they ultimately will look like remains uncertain, and our obligation to comply with them could entail significant costs, negatively affect our business, or limit our ability to incorporate certain AI capabilities into our business.
Any failure by us to protect our trademarks, trade secrets and other intellectual property, or our actual or allegedinfringement of other companies’ intellectual property, could harm our business.
We depend on our brands, such as the PriceSmart name and logo, to attract Members and make sales of goods and services. We monitor and protect against activities that might infringe, dilute or otherwise violate our trademarks and other intellectual property, and rely on trademark and other laws of the United States and other countries in which we operate. We also rely on copyright, trade secret and other intellectual property laws, as well as nondisclosure and confidentiality agreements and other methods, to protect our trademarks, trade names, proprietary information, technologies, and processes. Moreover, the steps we take to protect our intellectual property may not adequately protect our rights or prevent third parties from infringing or misappropriating our proprietary rights, and we may be unable to broadly enforce all of our trademarks. Any unauthorized use of our trademarks or other intellectual property could harm our competitive position and have a material adverse effect on our financial condition, cash flows or results of operations.
Additionally, we cannot be certain that we do not, or will not in the future, infringe on the intellectual property rights of third parties. Any intellectual property infringementclaimsagainst us could be costly, time-consuming and harmful to our reputation or could result in injunctive or other equitable relief that may require us to make changes to our business, any of which could have a material adverse effect on our financial condition, cash flows or results of operations.
We may need to engage in litigation or similar activities to enforce our intellectual property rights, to protect our trade secrets, or to determine the validity and scope of proprietary rights of others. Any such litigation, whether or not resolved in our favor, could require us to expend significant resources and divert the efforts and attention of our management and other personnel from our business operations.
Business acquisitions or divestitures and new business initiatives could adversely impact the Company’s performance .
From time to time, we may consider acquisition opportunities and new business initiatives. During fiscal year 2018, we acquired Aeropost, Inc. (“Aeropost”). Acquisitions and new business initiatives involve certain inherent risks, including the failure to retain key personnel from an acquired business; undisclosed or subsequently arising liabilities or accounting, internal control, regulatory or compliance issues associated with an acquired business; challenges in the successful integration of operations, and alignment of standards, policies and systems; future developments that may impair the value of our purchased goodwill or intangible assets; and the potential diversion of management resources from existing operations to respond to unforeseen issues arising in the context of the integration of a new business or initiative.
We sold the legacy casillero and marketplace businesses operated by Aeropost in October 2021. In connection with this sale, we retained the technology and intellectual property rights required for the furtherance of our business interest in PriceSmart.com and related capabilities. We could incur unforeseen expenses or other issues in connection with the separation of these businesses. In addition, we and the buyer of the legacy casillero and marketplace businesses agreed to indemnify each other for any breach of representations and warranties we made to one another in the purchase agreement. Pursuant to these indemnification obligations, during fiscal year 2023, we wrote off approximately $700,000 of accounts receivable from Aeropost to fully settle claims from Aeropost’s acquiror alleging that we breached representations and warranties regarding cybersecurity matters and worker classification.
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Failure to attract and retain qualified employees could materially adversely affect our financial performance.
Our success depends, to a significant degree, on the continued contributions of members of our senior management and other key operations, merchandising and administrative personnel. If we were to lose the services of a key member of our management team or a significant number of key team members within a short period of time or if we fail to execute management transitions when members of the Company’s senior leadership retire or otherwise leave the Company, this could have a material adverse effect on our business, financial condition and results of operations. In addition, any such departure could be viewed in a negative light by investors and analysts, which may cause our stock price to decline. We must attract, develop and retain a growing number of qualified employees, while controlling related labor costs and maintaining our core values. We compete with other retail and non-retail businesses for these employees and invest significant resources in training and motivating them. There is no assurance that we will be able to adequately attract, develop and retain highly qualified employees in the future.
Legal and Compliance Risks
We face compliance risks related to our international operations.
In the United States and within the international markets where we operate, there are multiple laws and regulations that relate to our business and operations. These laws and regulations are subject to change, and any failure by us to effectively manage our operations and reporting obligations as required by the various laws and regulations can result in our incurring significant legal costs and fines as well as disruptions to our business and operations. Such failure could also result in investors’ loss of confidence in us, which could have a material adverse effect on our stock price.
In foreign countries in which we have operations, a risk exists that our employees, contractors or agents could, in contravention of our policies, engage in business practices prohibited by U.S. laws and regulations applicable to us, such as the Foreign Corrupt Practices Act and the laws and regulations of other countries. We maintain policies prohibiting such business practices and have in place global anti-corruption compliance programs designed to ensure compliance with these laws and regulations. Nevertheless, we remain subject to the risk that one or more of our employees, contractors or agents, including those based in or from countries where practices that violate such U.S. laws and regulations or the laws and regulations of other countries may be customary, will engage in business practices that are prohibited by our policies or circumvent our compliance programs and, by doing so, violate such laws and regulations. Any violations of anti-corruption laws, even if prohibited by our internal policies, could adversely affect our reputation, business, or financial performance.
We could be subject to additional tax liabilities or subject to reserves on the recoverability of tax receivables .
We are subject to income taxes in the U.S. and many foreign jurisdictions. Significant judgment is required in determining our consolidated provision for income taxes. In the course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. We may recognize additional tax expense and be subject to additional tax liabilities due to changes in tax laws, regulations, and administrative practices and principles, including changes to the global tax framework, in various jurisdictions and any changes we make to our intercompany transaction structure. In recent years, multiple domestic and international tax proposals were proposed to impose greater tax burdens on large multinational enterprises. For example, the Organisation for Economic Co-operation and Development continues to advance proposals or guidance in international taxation, including the establishment of a global minimum tax.
We compute our income tax based on enacted tax rates in the countries in which we operate. As the tax rates vary among countries, a change in earnings attributable to the various jurisdictions in which we operate could result in an unfavorable change in our overall taxes. Changes in tax laws, increases in the enacted tax rates, adverse outcomes in connection with tax audits in any jurisdiction, or any change in the pronouncements relating to accounting for income taxes could have a material adverse effect on our financial condition and results of operations. In one of the countries where we operate, the government made changes several years ago in the method of computing minimum tax payments, under which the government sought to require retailers to pay taxes based on a percentage of sales if the resulting tax were greater than the tax payable based on a percentage of income (Alternative Minimum Tax or "AMT"). As a result, the Company has made and may continue to make income tax payments substantially in excess of those it would expect to pay based on taxable income, and the rules that allow the Company to obtain refunds or to offset payments that are substantially in excess of taxes payable based on taxable income are unclear or complex.
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For example, in fiscal year 2023, we recorded a $7.2 million charge to settle the minimum tax payment dispute in one country. Of this amount, $1.0 million is a reserve we recorded against an income tax receivable for one of the tax years for which we sought a refund and the remaining $6.2 million for the unpaid years of the dispute in which we made tax payments using the original computation based on taxable income. As part of the settlement, we will pay the minimum tax on a go-forward basis.
A few of our stockholders own approximately 14.8% of our voting stock as of August 31, 2025, which may make it difficult to complete some corporate transactions without their support and may impede a change in control.
Robert E. Price, the Company’s Chairman of the Board and Interim Chief Executive Officer, and affiliates of Mr. Price, including Price Philanthropies, The Price Group, LLC, The Robert & Allison Price Charitable Remainder Trust and various other trusts, collectively beneficially own approximately 14.8% of our outstanding shares of common stock. Of this amount, approximately 70.5% (i.e., 10.4% of our total outstanding shares) is held by charitable entities. As a result of their beneficial ownership, these stockholders have the ability to significantly affect the outcome of all matters submitted to our stockholders for approval, including the election of directors. In addition, this ownership could discourage the acquisition of our common stock by potential investors and could have an anti-takeover effect, possibly depressing the trading price of our common stock.
Financial and Accounting Risks
We are subject to volatility in foreign currency exchange rates and limits on our ability to convert foreign currencies into U.S. dollars.
As of August 31, 2025, we had a total of 56 warehouse clubs operating in 12 foreign countries and one U.S. territory, 44 of which operate under currencies other than the U.S. dollar. For fiscal year 2025, approximately 80.1% of our net merchandise sales were in foreign currencies. We may enter into additional foreign countries in the future or open additional locations in existing countries, which may increase the percentage of net merchandise sales denominated in foreign currencies.
Our consolidated financial statements are denominated in U.S. dollars, and to prepare those financial statements we must translate the amounts of the assets, liabilities, net sales, other revenues, and expenses of our operations outside of the U.S. from foreign currencies into U.S. dollars using exchange rates for the current period. As a result of such translations, fluctuations in currency exchange rates from period-to-period may result in our consolidated financial statements reflecting significant adverse period-over-period changes in our financial performance or reflecting a period-over-period improvement in our financial performance that is not as robust as it would be without such fluctuations in the currency exchange rates.
In addition, devaluing foreign local currencies compared to the U.S. dollar could negatively impact the purchasing power of our Members for imported merchandise in those countries. Merchandise imported into our markets is generally purchased by the Company in U.S. dollars and priced and sold in the local currency of that country. If the local currency devaluesagainst the U.S. dollar, we may elect to increase prices in the local currency to maintain our target margins, making the products more expensive for our Members. We may also decide to reduce or modify the flow of merchandise into those markets. Depending on the severity of the devaluation and corresponding price increase (as experienced in Colombia in fiscal year 2023), the demand for, sales of, and profitability of those products could be negatively impacted.
For example, the Colombian peso exchange rate with the U.S. dollar devalued approximately 15% on average throughout fiscal year 2023 compared to fiscal year 2022, reducing the U.S. dollar value of our sales and negatively affecting overall demand for our merchandise in Colombia during that year. In order to mitigate the significant price increase to our Members that would be required to maintain our target margins, we absorbed some of the increase in the costs of goods resulting from the devaluation and took pricing actions on certain product categories, which reduced our Total gross margin during that period until the exchange rate normalized and we were able to return to a more normalized profit margin. However, if the Colombia peso were to weaken again and we were to again absorb the costs of the devaluation or take pricing actions to lower the cost to our Members to mitigate a decrease in demand, consolidated Total gross margins could be negatively impacted.
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From time to time, we have experienced a lack of availability of U.S. dollars in certain markets (U.S. dollar illiquidity). This impedes our ability to convert local currencies obtained through merchandise sales into U.S. dollars to settle the U.S. dollar liabilities associated with our imported products or otherwise fund our operations. This illiquidity also increases our foreign exchange exposure to any devaluation of the local currency relative to the U.S. dollar. Additionally, we may incur significant premium costs to convert our local currencies into available tradable currencies and U.S. dollars. For instance, since fiscal year 2017, we have experienced this situation in Trinidad and have been unable to source a sufficient level of tradable currencies. We are working with our banks in Trinidad and government officials to convert all of our Trinidad dollars into tradable currencies. Our balance as of August 31, 2025 of Trinidad dollar denominated cash and cash equivalents and short and long-term investments measured in U.S. dollars was $59.7 million, a decrease of $40.8 mill ion from the peak of $100.5 million as of November 30, 2020. However, as the Trinidad central bank strictly manages the exchange rate of the Trinidad dollar with the U.S. dollar and affects the level of U.S. dollar liquidity in the market through its interventions, we are subject to continued challenges in converting our Trinidad dollars to U.S. dollars, as well as being exposed to the risk of a potential devaluation of the currency. While we are currently able to source substantially all the U.S. dollars that we need in Honduras, we faced similar U.S. dollar liquidity challenges in Honduras during fiscal year 2023 through much of fiscal year 2025 and the Central bank still has strict controls there on the availability of U.S. dollars.
Volatility and uncertainty regarding the currencies and economic conditions in the countries where we operate could have a material impact on our operations in future periods.
Changes in accounting standards and assumptions, projections, estimates and judgments by management related to complex accounting matters could significantly affect our financial condition and results of operations.
Generally accepted accounting principles and related accounting pronouncements, implementation guidelines and interpretations with regard to a wide range of matters that are relevant to our business are highly complex and involve many subjective assumptions, projections, estimates and judgments by our management. These include, but are not limited to assumptions, projections, estimates and judgements related to contingencies and litigation, income taxes, value added taxes, and long-lived assets. Changes in these rules or their interpretation or changes in underlying assumptions, projections, estimates or judgments by our management could significantly change our reported or expected financial performance.
For example, because of Accounting Standards Update ASU 2016-02 – Leases (Topic 842), which the Company adopted September 1, 2019, the Company is required to recognize a “Right-of-Use” (ROU) asset and lease liability for each of the Company’s long-term leases. Accounting Standard Codification (ASC) 842 requires that the ROU asset be designated as a non-monetary asset and the lease liability as a monetary liability. Therefore, when accounting for a lease that is denominated in a foreign currency, if remeasurement into the lessee’s functional currency is required, the lease liability is remeasured using the current exchange rate. We have leases in several of our subsidiaries in which the lease payments are denominated in a foreign currency that is not the functional currency of that entity. Therefore, we are subject to additional volatility in foreign currency exchange rates as a result of this accounting standard update. The monetary lease liability subject to revaluation as of August 31, 2025 was $52.7 million. Due to the mix of foreign currency exchange rate fluctuations during fiscal year 2025, the impact to the consolidated statements of income of revaluing this liability was immaterial.
Mission
PriceSmart's mission is to provide all Members an outstanding shopping experience with high quality, exciting merchandise and services at the lowest possible prices.
Purpose
PriceSmart's purpose is to improve the lives and businesses of our Members, our employees and our communities through the responsible delivery of the best quality goods and services at the lowest possible prices. We aim to serve as a model company, which operates profitably and provides a good return to our investors, by providing Members in emerging and developing markets with exciting, high-quality merchandise sourced from around the world and valuable services at compelling prices in safe U.S.-style clubs and through PriceSmart.com. We prioritize the well-being and safety of our Members and employees. We provide good jobs, fair wages and benefits and opportunities for advancement. We strive to treat our suppliers right and empower them when we can, including both our regional suppliers and those from around the world. We try to conduct ourselves in a socially responsible manner as we endeavor to improve the quality of the lives of our Members and their businesses, while respecting the environment and the laws of all the countries in which we operate. We also believe in facilitating philanthropic contributions to the communities in which we do business. We charge Members an annual membership fee that enables us to operate our business with lower margins than traditional retail stores. As we continue to invest in technological capabilities, we are increasing our tools to drive sales and operational efficiencies. We believe we are well positioned to blend the excitement and appeal of our brick-and-mortar business with the convenience and additional benefits of online shopping and services, while simultaneously enhancing Member experience and engagement.
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Factors Affecting the Business
Overall economic trends, foreign currency exchange volatility, and other factors impacting the business
Our sales and profits vary from market to market depending on general economic factors, including GDP growth; consumer preferences; foreign currency exchange rates; political and social conditions; local demographic characteristics (such as population growth); the number of years we have operated in a particular market; and the level of retail and wholesale competition in that market. The economies of many of our markets are dependent on foreign trade, tourism, remittances from foreign workers located in the United States to individuals or family members in their home countries, and foreign direct investments. Uncertain economic conditions and slowdown in global economic growth and investment may impact the economies in our markets, causing significant declines in GDP and employment and devaluations of local currencies against the U.S. dollar.
Inflationary pressures could significantly impact product costs, and commodity price increases have and could again impact our financial results and could lead to reduced sales, fewer units sold, and/or margin pressure. For example, the COVID-19 pandemic resulted, directly or indirectly, in market and supply-chain disruptions, which increased the complexity of managing our inventory flow and business and resulted in substantial inventory markdowns on certain non-food product categories in the third quarter of fiscal year 2022. In addition, shipping and freight rates increased dramatically during that time. Similar challenges could reoccur in the future. While supply chains and transportation rates have normalized, we continue to work to hold down and/or mitigate price increases passed on to our Members while maintaining the right inventory mix to grow sales. One key factor has been our expanded network of distribution centers, which has facilitated alternative shipping routes, increased merchandise throughput, and provided flexibility to mitigate our supply chain challenges and risks more effectively.
Currency fluctuation can be one of the largest variables affecting our overall sales and profit performance because many of our markets are susceptible to foreign currency exchange rate volatility. For fiscal year 2025, some markets, especially Costa Rica, benefited from currency appreciation, which helped offset currency devaluations we experienced in some of the other countries. During fiscal year 2025, approximately 80.1% of our net merchandise sales were in currencies other than the U.S. dollar. Of those sales, 49.0% consisted of sales of products we purchased in U.S. dollars.
A devaluation of local currency reduces the value of sales and membership income that is generated in that country when translated to U.S. dollars for our consolidated results. In addition, when local currency experiences devaluation, we may elect to increase the local currency price of imported merchandise to maintain our target margins, which could impact demand for the merchandise affected by the price increase. Alternatively, we may elect not to raise prices to fully cover the impact of the devaluation, adversely affecting our margins. For example, during fiscal year 2023, the currency in Colombia devalued approximately 15%, but we selectively held pricing steady or took pricing actions to mitigate declines in demand, which negatively impacted our consolidated Total gross margin percentage. We may also modify the mix of imported versus local merchandise and/or the source of imported merchandise to mitigate the impact of currency fluctuations. Information about the effect of local currency devaluations is discussed further in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Net Merchandise Sales and Comparable Sales.”
Our wallet-share capture of total retail and wholesale sales can vary from market to market due to competition and the availability of other shopping options for our Members. Demographic characteristics within each of our markets can affect both the overall level of sales and future sales growth opportunities. Certain island markets, such as Aruba, Barbados and the U.S. Virgin Islands, offer limited upside for sales growth given their overall market size.
We continue to face the risk of political instability which may have significant effects on our business. For example, protestors set up roadblocks in Panama during October and November 2023 as a reaction to an agreement between the Panamanian government and a mining company, disrupting traffic to our clubs throughout most of the market. In the third quarter of fiscal year 2025, Panama once again experienced widespread protests and social unrestagainst the government. Roadblocks in Guatemala in October 2023 related to election protests also limited access to certain of our warehouse clubs. Civil unrest in Colombia in response to tax reform and austerity measures paralyzed significant portions of the country’s infrastructure during the third quarter of fiscal year 2021.
Our operations are subject to volatile weather conditions and natural disasters. In November 2020, Hurricanes Eta and Iota brought severe rainfall, winds, and flooding to a significant portion of Central America, especially Honduras, which caused significant damage to parts of that country’s infrastructure. Although our warehouse clubs were not significantly affected and we were able to manage our supply chain to keep our warehouse clubs stocked with merchandise, similar natural disasters could adversely impact our overall sales, costs and profit performance in the future.
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At times we face difficulties in the shipment of, and the risks inherent in the importation of, merchandise to our warehouse clubs. One of those difficulties is possible governmental restrictions on the importation of merchandise. In late May 2023, disputes with Nicaraguan customs and tax authorities resulted in delays in the issuance of our importation clearance, and general delays in the customs inspection process. While this situation had occurred frequently prior to May 2023, we generally were able to plan around these import blockages and resume imports within a matter of days. However, this last delay in obtaining importation clearance resulted in our being unable to import merchandise into Nicaragua for several weeks in June 2023. While our tax clearances and imports have returned to a normal cadence, we could see delays of imports into Nicaragua again as well as in other jurisdictions in which we operate.
Our operations depend on shipping, trucking, ports and other elements of the supply chain that often rely on unionized labor. A work stoppage or other limitation on operations from union or other labor-related matters could occur for any number of reasons, including as a result of disputes under existing collective bargaining agreements with labor unions or in connection with negotiation of new collective bargaining agreements. For example, while it did not impact our export activities, we experienced a brief disruption to the flow of imported merchandise into our Miami distribution center operations because of the U.S. dockworkers strike in October 2024.
Current uncertainties about tariffs may have an adverse effect on our Company. The U.S. government has implemented significant tariff measures, including a baseline tariff of 10% on products from all countries and higher rates targeting specific countries. For additional information, see "Item 1A — Risk Factors — We are vulnerable to changes in the political and economic conditions such as tariffs and/or international trade wars and disruptions to remittances."
In July 2025, the United States enacted significant tax legislation commonly referred to as the One Big Beautiful Bill Act ("OBBBA"). The OBBBA makes permanent many provisions of the Tax Cuts and Jobs Act of 2017 and introduces additional changes affecting individuals and businesses. Key business-related provisions include the continuation of the 21% federal corporate income tax rate, enhancements to bonus depreciation and expensing rules, and modifications to certain international provisions, including Global Intangible Low-Taxed Income and Foreign-Derived Intangible Income deductions. The OBBBA also includes other targeted measures, including a 1% excise tax on foreign remittances.
We have reviewed the OBBBA and continue to monitor and model its potential impact on our operations and effective tax rate. Based on our current analysis of the Company's operating profile, we do not expect material effects on our 2026 fiscal year results or to our results going forward, considering our existing tax profile. Most provisions that represent substantive changes to existing law, including adjustments to international tax regimes and certain deduction limitations, are scheduled to take effect during our fiscal year 2027.
Changes in tax laws, increases in the enacted tax rates, adverse outcomes in connection with tax audits in any jurisdiction, or any change in the pronouncements relating to accounting for income taxes could have a material adverse effect on our financial condition and results of operations. In one of the countries where we operate, the government made changes several years ago in the method of computing minimum tax payments, under which the government sought to require retailers to pay taxes based on a percentage of sales if the resulting tax were greater than the tax payable based on a percentage of income (Alternative Minimum Tax or "AMT"). We, together with our tax and legal advisers, appealed these interpretations and litigated our cases in the country’s court system. Nevertheless, in fiscal year 2023, we recorded a $7.2 million charge to settle the minimum tax payment dispute. To address the inherent risk of operating in a country in which tax legislation changes can significantly impact our business because of our low-margin business model and in which our ability to successfully appeal the application of these taxes is limited, we have increased prices in this market to offset or partially offset the rise in costs to comply with the annual AMT payment. These and other challenges may persist or become more acute and could have a material adverse effect on our business and results of operations.
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From time to time, we have experienced a lack of availability of U.S. dollars in certain markets (U.S. dollar illiquidity). This impedes our ability to convert local currencies obtained through merchandise sales into U.S. dollars to settle the U.S. dollar liabilities associated with our imported products or otherwise fund our operations. This illiquidity also increases our foreign exchange exposure to any devaluation of the local currency relative to the U.S. dollar. Additionally, the Company may incur significant premium costs to convert our local currencies into available tradable currencies and U.S. dollars. For instance, since fiscal year 2017, we have experienced this situation in Trinidad and have been unable to source a sufficient level of tradable currencies. We are working with our banks in Trinidad and government officials to convert all of our Trinidad dollars into tradable currencies. Our balance as of August 31, 2025 of Trinidad dollar denominated cash and cash equivalents and short and long-term investments measured in U.S. dollars was $59.7 million, a decrease of $40.8 mill ion from the peak of $100.5 million as of November 30, 2020. However, as the Trinidad central bank strictly manages the exchange rate of the Trinidad dollar with the U.S. dollar and affects the level of U.S. dollar liquidity in the market through its interventions, we are subject to continued challenges in converting our Trinidad dollars to U.S. dollars, as well as being exposed to the risk of a potential devaluation of the currency. In July 2025, the Company entered into financing transactions to provide our Trinidad subsidiary with additional U.S. dollar liquidity needed to meet its operational needs and help reduce the shortfall in U.S. dollar sourcing due to continued illiquid foreign exchange conditions in that market. Refer to Part II. “Item 8. Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements, Note 11 - Debt” for additional information.
While we are currently able to source substantially all the U.S. dollars that we need in Honduras, we faced similar U.S. dollar liquidity challenges in Honduras during fiscal year 2023 through much of fiscal year 2025 and the Central bank still has strict controls there on the availability of U.S. dollars.
Financial highlights for the fourth quarter of fiscal year 2025 included:
• Total revenues increased 8.6% over the comparable prior year period.
• Net merchandise sales increased 9.2% over the comparable prior year period. We ended the quarter with 56 warehouse clubs compared to 54 warehouse clubs at the end of the fourth quarter of fiscal year 2024. Net merchandise sales - constant currency increased 9.1% over the comparable prior year period.
• Comparable net merchandise sales (that is, sales in the 54 warehouse clubs that have been open for greater than 13 ½ calendar months) and comparable net merchandise sales - constant currency for the 13 weeks ended August 31, 2025 increased 7.5%.
• Membership income for the fourth quarter of fiscal year 2025 increased 14.9% to $22.6 million over the comparable prior year period.
• Total gross margins (net merchandise sales less associated cost of goods sold) increased 9.0% over the prior year period, and merchandise gross profits as a percent of net merchandise sales remained unchanged at 15.7% from the same period in the prior year.
• Selling, general and administrative expenses increased $16.5 million or 10.1% compared to the fourth quarter of fiscal year 2024, primarily due to investments in technology, such as the RELEX and Elera projects.
• Operating income for the fourth quarter of fiscal year 2025 was $52.8 million, an increase of 7.2%, or $3.6 million, compared to the fourth quarter of fiscal year 2024.
• We recorded a $6.4 million net loss in total other expense, net in the fourth quarter of fiscal year 2025 compared to a $7.4 million net loss in total other expense, net in the same period last year due to a decrease in other expense, net of $1.0 million primarily driven by a decrease in foreign currency conversion transaction costs.
• Our effective tax rate increased in the fourth quarter of fiscal year 2025 to 32.0% from 30.4% in the fourth quarter of fiscal year 2024 primarily due to the impact of foreign exchange transactions and reduced intercompany charges during the quarter.
• Net income for the fourth quarter of fiscal year 2025 was $31.5 million, or $1.02 per diluted share, compared to $29.1 million, or $0.94 per diluted share, for the fourth quarter of fiscal year 2024.
• Adjusted EBITDA for the fourth quarter of fiscal year 2025 was $75.5 million compared to $70.7 million in the same period last year.
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Financial highlights for fiscal year 2025 included:
• Total revenues increased 7.2% over the prior year.
• Net merchandise sales increased 7.7% over the prior year. We ended the year with 56 warehouse clubs compared to 54 warehouse clubs at the end of fiscal year 2024. Net merchandise sales - constant currency increased 8.5% over the prior year.
• Comparable net merchandise sales (that is, sales in the 54 warehouse clubs that have been open for greater than 13 ½ calendar months) for the 52 weeks ended August 31, 2025 increased 6.7%. Comparable net merchandise sales - constant currency for the 52 weeks ended August 31, 2025 increased 7.5%.
• Membership income increased 13.7% to $85.6 million.
• Total gross margins (net merchandise sales less associated cost of goods sold) increased 7.4% over the prior year, and merchandise gross profits as a percent of net merchandise sales decreased to 15.7% from 15.8% compared to the prior year.
• Selling, general and administrative expenses increased $55.9 million, or 8.9%, in fiscal year 2025 compared to fiscal year 2024, primarily due to investments in technology, such as the RELEX and Elera projects.
• Operating income was $232.5 million in fiscal year 2025, an increase of 5.2%, or $11.6 million, compared to fiscal year 2024.
• We recorded a $26.0 million net loss in total other expense, net in fiscal year 2025 compared to a $19.5 million net loss in total other expense, net in the prior year due to an increase in unrealized losses in value of U.S. dollar-denominated monetary assets and liabilities in several of our markets.
• The effective tax rate for fiscal year 2025 was 28.4% as compared to the effective tax rate for fiscal year 2024 of 31.1%. The decrease is primarily related to the implementation of certain tax optimization initiatives at the beginning of fiscal year 2025.
• Net income for fiscal year 2025 was $147.9 million, or $4.82 per diluted share, compared to $138.9 million, or $4.57 per diluted share, for fiscal year 2024.
• Adjusted EBITDA for fiscal year 2025 was $320.7 million compared to $303.6 million in the prior year.
Non - GAAP (Generally Accepted Accounting Principles) Financial Measures
The accompanying Consolidated Financial Statements, including the related notes, are presented in accordance with U.S. GAAP (Generally Accepted Accounting Principles). In addition to relevant GAAP measures, we also provide non-GAAP measures including adjusted EBITDA, net merchandise sales - constant currency and comparable net merchandise sales - constant currency because management believes these metrics are useful to investors and analysts by excluding items that we do not believe are indicative of our core operating performance. These measures are customary for our industry and commonly used by competitors. However, these non-GAAP financial measures should not be reviewed in isolation or considered as an alternative to any other performance measure derived in accordance with GAAP and may not be comparable to similarly titled measures used by other companies in our industry or across different industries.
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Adjusted EBITDA
Adjusted EBITDA is defined as net income before interest expense, provision for income taxes and depreciation and amortization, adjusted for the impact of certain other items, including interest income and; other income (expense), net. The following is a reconciliation of our Net income to Adjusted EBITDA for the periods presented:
Three Months Ended
Years Ended
(Amounts in thousands)
August 31,
August 31,
August 31,
August 31,
Net income as reported
Adjustments:
Interest expense
Provision for income taxes
Depreciation and amortization
Interest income
Other expense, net (1)
Adjusted EBITDA
(1) Primarily consists of transaction costs of converting the local currencies into available tradable currencies in some of our countries with liquidity issues and foreign currency losses or gains due to the revaluation of monetary assets and liabilities (primarily U.S. dollars) for the three and twelve months ended August 31, 2025 and August 31, 2024.
Net Merchandise Sales - Constant Currency
As a multinational enterprise, we are exposed to changes in foreign currency exchange rates. The translation of the operations of our foreign-based entities from their local currencies into U.S. dollars is sensitive to changes in foreign currency exchange rates and can have a significant impact on our reported financial results. We believe that constant currency is a useful measure, indicating the actual growth of our operations. When we use the term "net merchandise sales - constant currency," it means that we have translated current year net merchandise sales at prior year monthly average exchange rates. Net merchandise sales - constant currency results exclude the effects of foreign currency translation. Similarly, when we use the term "comparable net merchandise sales - constant currency," it means that we have translated current year comparable net merchandise sales at prior year monthly average exchange rates. Comparable net merchandise sales – constant currency results exclude the effects of foreign currency translation. Refer to “Management’s Discussion & Analysis – Net Merchandise Sales” and Refer to “Management’s Discussion & Analysis – Comparable Net Merchandise Sales” for our quantitative analysis and discussion. Reconciliations between net merchandise sales - constant currency and comparable net merchandise sales - constant currency and the most directly comparable GAAP measures are included where applicable.
Comparison of Fiscal Year 2025 to 2024
The following discussion and analysis compares the results of operations for the fiscal years ended August 31, 2025 and 2024 and should be read in conjunction with the consolidated financial statements and the accompanying notes included elsewhere in this report. For a comparison of the fiscal years ended August 31, 2024 and 2023, please see Part II. “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition” in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2024 filed with the SEC on October 30, 2024. Unless otherwise noted, all tables present U.S. dollar amounts in thousands. Certain percentages presented are calculated using actual results prior to rounding. Our operations consist of four reportable segments: Central America, the Caribbean, Colombia and the United States. The Company’s reportable segments are based on management’s organization of these locations into operating segments by general geographic location, which are used by management and the Company's chief operating decision maker in setting up management lines of responsibility, providing support services, and making operational decisions and assessments of financial performance. Segment amounts are presented after converting to U.S. dollars and consolidating eliminations. From time to time, we revise the measurement of each segment's operating income, including certain corporate overhead allocations, and other measures as determined by the information regularly reviewed by our chief operating decision maker. When we do so, the previous period amounts and balances are reclassified to conform to the current period's presentation.
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Net Merchandise Sales
The following tables indicate the net merchandise sales in the reportable segments in which we operate and the percentage growth in net merchandise sales by segment during fiscal years 2025 and 2024:
Years Ended
August 31, 2025
August 31, 2024
Amount
% of net
sales
Increase from prior year
Change
Amount
% of net
sales
Central America
Caribbean
Colombia
Net merchandise sales
Overall, net merchandise sales grew by 7.7% for fiscal year 2025 compared to fiscal year 2024, driven by a 5.9% increase in transactions and a 1.7% increase in average ticket. Transactions represent the total number of visits our Members make to our warehouse clubs resulting in a sale and the total number of PriceSmart.com transactions involving home delivery or curbside pickup via the Company`s Click & Go® service. Average ticket represents the amount our Members spend on each visit or PriceSmart.com order. We had 56 clubs in operation as of August 31, 2025 compared to 54 clubs as of August 31, 2024.
Net merchandise sales in our Central America segment increased 7.5% during fiscal year 2025. This increase had a 460 basis point (4.6%) positive impact on total net merchandise sales growth. All markets within this segment had positive net merchandise sales growth for the twelve-month period ended August 31, 2025. We opened our ninth warehouse club in Costa Rica in April 2025 and our seventh warehouse club in Guatemala in August 2025.
Net merchandise sales in our Caribbean segment increased 6.6% during fiscal year 2025. This increase had a 180 basis point (1.8%) positive impact on total net merchandise sales growth. All of our markets in this segment had positive net merchandise sales growth.
Net merchandise sales in our Colombia segment increased 11.4% during fiscal year 2025. This increase had a 130 basis point (1.3 %) positive impact on total net merchandise sales gro wth.
The following table indicates the impact that currency exchange rates had on our net merchandise sales in dollars and the percentage impact of foreign currency exchange rate fluctuations on net merchandise sales growth. When we use the term "net merchandise sales - constant currency," it means that we have translated current year net merchandise sales at prior year monthly average exchange rates. Net merchandise sales - constant currency results exclude the effects of foreign currency translation. Impact of foreign currency is the effect of currency fluctuations on our net merchandise sales.
Year Ended
August 31, 2025
Net Merchandise Sales
Net Merchandise Sales - Constant Currency
Impact of Foreign Currency Exchange
Net Merchandise Sales Growth
Net Merchandise Sales - Constant Currency Growth
% Impact of Foreign Currency Exchange
Central America
Caribbean
Colombia
Consolidated total
Overall, the effects of currency fluctuations within our markets had an approximately $36.8 million, or 80 basis point (0.8%), negative impact on net merchandise sales for the twelve-months ended August 31, 2025 .
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Currency fluctuations had a $21.4 million, or 70 basis point (0.7%), positive impact on net merchandise sales in our Central America segment for the twelve months ended August 31, 2025. These currency fluctuations contributed approximately 40 basis points (0.4%) of positive impact on total net merchandise sales for fiscal year 2025. The Costa Rican colón appreciated against the dollar when compared to the prior year and was a significant factor in the contribution to the favorable currency fluctuations in this segment.
Currency fluctuations had a $24.5 million, or 180 basis point (1.8%), negative impact on net merchandise sales in our Caribbean segment for the twelve months ended August 31, 2025. These currency fluctuations contributed approximately 50 basis points (0.5%) of negative impact on total net merchandise sales growth for the current fiscal year period. This negative impact was primarily driven by the devaluation of the Dominican Peso as compared to the prior year.
Currency fluctuations had a $33.6 million, or 620 basis point (6.2%), negative impact on net merchandise sales in our Colombia segment for the twelve months ended August 31, 2025. These currency fluctuations contributed approximately 70 basis points (0.7%) of negative impact on total net merchandise sales for the current fiscal year period.
Net Merchandise Sales by Category
The following table indicates the approximate percentage of net sales accounted for by each major category of items sold during the fiscal years ended August 31, 2025 and 2024:
Years Ended August 31,
Foods & Sundries
Fresh Foods
Hardlines
Softlines
Food Service and Bakery
Health Services
Net Merchandise Sales
The mix of sales by major category remained mostly steady year-over-year. Net sales of Foods & Sundries increased approximately 5% between fiscal year 2025 and 2024 but decreased by 2% as a percentage of net merchandise sales. Net sales of Fresh Foods increased approximately 12% between fiscal year 2025 and 2024 and increased by 1% as a percentage of net merchandise sales. Shifts in consumer preferences contributed to the changes in category mix.
Comparable Net Merchandise Sales
We report comparable net merchandise sales on a “same week” basis with 13 weeks in each quarter beginning on a Monday and ending on a Sunday. The periods are established at the beginning of the fiscal year to provide as close a match as possible to the calendar month and quarter that is used for financial reporting purposes. This approach equalizes the number of weekend days and weekdays in each period for improved sales comparison as we experience higher merchandise club sales on the weekends. Further, each of the warehouse clubs used in the calculations was open for at least 13 ½ calendar months before its results for the current period were compared with its results for the prior period . As a result, sales related to two of our clubs opened during fiscal year 2025 will not be used in the calculation of comparable sales until they have been open for at least 13 ½ months. Therefore, comparable net merchandise sales includes 54 warehouse clubs for the 52- week period ended August 31, 2025 .
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The following table indicates the comparable net merchandise sales in the reportable segments in which we operate and the percentage changes in net merchandise sales by segment during the 52-week periods ended August 31, 2025 and September 1, 2024 compared to the prior year:
Fifty-Two Weeks Ended
August 31, 2025
September 1, 2024
% Increase
in Comparable
Net Merchandise Sales
% Increase
in Comparable
Net Merchandise Sales
Central America
Caribbean
Colombia
Consolidated comparable net merchandise sales
Comparable net merchandise sales for those warehouse clubs that were open for at least 13 ½ months for some or all of the 52-week period ended August 31, 2025 increased 6.7%.
Comparable net merchandise sales in our Central America segment increased 5.6% for the 52-week period ended August 31, 2025. All of our markets in Central America had positive comparable net merchandise sales growth. The positive comparable net merchandise sales growth for our Central America segment contributed approximately 340 basis points (3.4%) of positive impact in total comparable merchandise sales.
Comparable net merchandise sales in our Caribbean segment increased 7.2% for the 52-week period ended August 31, 2025. This increase contributed approximately 200 basis points (2.0%) of positive impact on total comparable net merchandise sales. Our Jamaica market continued its strong performance in the 52-week period, with 13.1% comparable net merchandise sales growth.
Comparable net merchandise sales in our Colombia segment increased 11.8% for the 52-week period ended August 31, 2025. This increase contributed approximately 130 basis points (1.3%) of positive impact to the increase in total comparable net merchandise sales.
When we use the term "comparable net merchandise sales - constant currency," it means that we have translated current year comparable net merchandise sales at prior year monthly average exchange rates. Comparable net merchandise sales - constant currency results exclude the effects of foreign currency translation. The following tables illustrate the comparable net merchandise sales - constant currency percentage growth and the impact that changes in foreign currency exchange rates had on our comparable merchandise sales percentage growth for the 52-week period ended August 31, 2025:
Fifty-Two Weeks Ended August 31, 2025
Comparable Net Merchandise Sales Growth
Comparable Net Merchandise Sales - Constant Currency Growth
% Impact of Foreign Currency Exchange
Central America
Caribbean
Colombia
Consolidated comparable net merchandise sales
Overall, the mix of currency fluctuations within our markets had 80 basis points (0.8%) of negative impact on comparable net merchandise sales for the 52-week period ended August 31, 2025.
Currency fluctuations within our Central America segment accounted for approximately 40 basis points (0.4%) of positive impact on total comparable merchandise sales for the 52-week period ended August 31, 2025. Our Costa Rica market was the main contributor as the market experienced currency appreciation when compared to the same period last year.
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Currency fluctuations within our Caribbean segment accounted for approximately 50 basis points (0.5%) of negative impact on total comparable merchandise sales for the 52-week period ended August 31, 2025. Our Dominican Republic and Jamaica markets experienced currency devaluation when compared to the same period last year.
Currency fluctuations within our Colombia segment accounted for approximately 70 basis points (0.7%) of negative impact on total comparable net merchandise sales for the 52-week period ended August 31, 2025.
Membership Income
Membership income is recognized ratably over the one-year life of the membership.
Years Ended
August 31,
August 31,
Amount
% of Total Operating Income
Increase from prior year
% Change
Membership
Income % to
Net Merchandise
Sales
Amount
% of Total Operating Income
Membership income - Central America
Membership income - Caribbean
Membership income - Colombia
Membership income - Total
Number of accounts -
Central America
Number of accounts - Caribbean
Number of accounts - Colombia
Number of accounts - Total
The number of Member accounts at the end of fiscal year 2025 was 6.2% higher than the prior year. Membership income increased 13.7% compared to the prior year.
Membership income, which is recognized ratably over the 12-month term of the membership, increased in all of our segments in the twelve months ended August 31, 2025. The consolidated increase in membership income is primarily due to the $5 increase to our membership fee which we implemented on a staggered basis in most countries during fiscal year 2024 and an increase in the platinum membership base since the prior year. In our Central America segment, membership income increased compared to fiscal year 2024, primarily attributable to the $5 increase and the opening of two new clubs. In our Colombia segment, membership income rose compared to fiscal year 2024 due to an increase in membership accounts. Similarly, in our Caribbean segment, membership income rose compared to fiscal year 2024, primarily attributable to the $5 increase to our membership fee. Additionally, all of our segments have increased their membership base since August 31, 2024.
We offer the Platinum Membership program in all locations where PriceSmart operates. The annual fee for a Platinum Membership in most markets is approximately $80, depending on the market in which the Member lives. The Platinum Membership program provides Members with a 2% rebate on most items, up to an annual maximum of $500. We record the 2% rebate as a reduction of net merchandise sales at the time of the sales transaction. Platinum Membership accounts are 17.9% of our total membership base as of August 31, 2025, an increase from 12.3% as of August 31, 2024. Platinum Members tend to have higher renewal rates than our Diamond Members. During fiscal years 2025 and 2024, we ran platinum promotional campaigns, resulting in an increase in the total number of Platinum Members.
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Our trailing twelve-month renewal rate was 88.8% and 87.9% for the fiscal years ended August 31, 2025 and August 31, 2024, respectively.
Other Revenue
Other revenue primarily consists of our interest-generating portfolio from our co-branded credit cards and rental income from operating leases where the Company is the lessor.
Years Ended
August 31, 2025
August 31, 2024
Amount
Increase from prior year
% Change
Amount
Miscellaneous income
Rental income
Other revenue
Comparison of Fiscal Year 2025 to 2024
The primary driver of the increase in other revenue for the year ended August 31, 2025 was an increase in Miscellaneous income driven primarily by an increase in interest-generating portfolio revenue due to Members having higher average outstanding balances on our co-branded credit cards compared to the prior year.
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Results of Operations
Years Ended
Results of Operations Consolidated
August 31, 2025
August 31, 2024
(Amounts in thousands, except percentages and number of warehouse clubs)
Net merchandise sales
Net merchandise sales
Total gross margin
Total gross margin percentage
Revenues
Total revenues
Percentage change from prior period
Comparable net merchandise sales
Total comparable net merchandise sales increase
Total revenue margin
Total revenue margin
Total revenue margin percentage
Selling, general and administrative
Selling, general and administrative
Selling, general and administrative percentage of total revenues
Operational data
Warehouse clubs at period end
Warehouse club sales floor square feet at period end
Years Ended
Results of Operations Consolidated
August 31,
Total Revenue
August 31,
Total Revenue
Operating income by segment
Central America
Caribbean
Colombia
United States
Reconciling Items (1)
Operating income - Total
(1) The reconciling items reflect the amount eliminated upon consolidation of intersegment transactions.
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The following table summarizes the selling, general and administrative expense for the periods disclosed:
Years Ended
August 31, 2025
Total Revenue
August 31, 2024
Total Revenue
Warehouse club and other operations
General and administrative
Pre-opening expenses
Loss on disposal of assets
Total Selling, general and administrative
Total gross margin is derived from our Revenue – Net merchandise sales less our Cost of goods sold – Net merchandise sales and represents our sales and cost of sales generated from the business activities of our warehouse clubs. We express our Total gross margin percentage as a percentage of our Net merchandise sales.
On a consolidated basis, total gross margin as a percent of net merchandise sales for fiscal year 2025 decreased to 15.7% compared to 15.8% for fiscal year 2024.
Total revenue margin is derived from Total revenues, which includes our Net merchandise sales, Membership income, Export sales, and Other revenue and income less our Cost of goods sold for Net merchandise sales, Export sales, and Non-merchandise revenues. We express our Total revenue margin as a percentage of Total revenues.
Total revenue margin increased to 17.4% from 17.2% for the twelve months ended August 31, 2025 compared to the prior year.
Selling, general, and administrative expenses consist of warehouse club and other operations, general and administrative expenses, preopening expenses, and loss (gain) on disposal of assets. In total, selling, general and administrative expenses increased $55.9 million compared to the prior year, and increased as a percentage of total revenues by 20 basis points (0.2%) to 12.9% of total revenues for fiscal year 2025 compared to 12.7% of total revenues for fiscal year 2024.
Warehouse club and other operations expenses remained unchanged at 9.5% of total revenues from the prior fiscal year.
General and administrative expenses increased to 3.4% of total revenues for the current year compared to 3.2% for fiscal year 2024. The 20 basis point (0.2%) increase is primarily due to investments in technology, inclusive of $3.7 million related to transformation and growth projects, such as RELEX and Elera. Additionally, the Company incurred approximately $1.6 million of one-time expenses associated with Chief Financial Officer transition costs, as well as $1.1 million related to the relocation of the San Diego corporate headquarters.
For fiscal year 2026, we estimate that general and administrative expenses will be impacted by $5.0 million for the compensation of our Chief Executive Officer.
Operating income in fiscal year 2025 increased to $232.5 million (4.4% of total revenues) compared to $220.9 million (4.5% of total revenues) for the prior year.
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Interest Income
Interest income represents the earnings generated from interest-bearing assets held by PriceSmart, Inc. and our wholly owned foreign subsidiaries. These assets include investments in fixed income securities and deposits held with financial institutions. The interest income is derived from the interest payments received on these assets, which serve to enhance our overall financial returns.
Years Ended
August 31,
August 31,
Amount
Change
Amount
Interest income
Interest income decreased for the twelve-month period ended August 31, 2025 primarily due to a decrease of yields when compared to the prior year.
Interest Expense
Years Ended
August 31,
August 31,
Amount
Change
Amount
Interest expense on loans
Interest expense related to hedging activity
Less: Capitalized interest
Interest expense
Interest expense reflects borrowings by PriceSmart, Inc. and our wholly owned foreign subsidiaries to finance new land acquisition and construction for new warehouse clubs and distribution centers, warehouse club expansions, the capital requirements of warehouse club and other operations, and ongoing working capital requirements.
Interest expense decreased for the twelve-month period ended August 31, 2025 , primarily due to lower debt balances for a majority of the fiscal year and higher capitalized interest partially offset by higher interest expense related to hedging activities when compared to the prior year.
Other Expense, net
Other expense, net consists of currency gains or losses, as well as net benefit costs related to our defined benefit plans and other items considered to be non-operating in nature.
Years Ended
August 31,
August 31,
Amount
Change
Amount
Other expense, net
Monetary assets and liabilities denominated in currencies other than the functional currency of the respective entity (primarily U.S. dollars) are revalued to the functional currency using the exchange rate on the balance sheet date. These foreign exchange transaction gains/(losses) are recorded as currency gains or losses. Additionally, gains or losses from transactions denominated in currencies other than the functional currency of the respective entity also generate currency gains or losses.
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For the twelve months ended August 31, 2025, the primary drivers of Other expense, net were $14.9 million of transaction costs, associated with converting the local currencies into available tradable currencies before converting them to U.S. dollars in some of our countries with foreign exchange liquidity issues. Additionally, during the twelve months ended August 31, 2025, our markets contributed $9.2 million of losses due to revaluation of monetary assets and liabilities (primarily U.S. dollars).
Provision for Income Taxes
The tables below summarize the effective tax rate for the periods reported:
Years Ended
August 31,
August 31,
Amount
Change
Amount
Current tax expense
Net deferred tax benefit
Provision for income taxes
Effective tax rate
For fiscal year 2025, the effective tax rate was 28.4% compared to 31.1% for fiscal year 2024. The decrease in the effective rate versus the prior year was primarily attributable to the implementation of certain tax optimization initiatives at the beginning of fiscal year 2025.
Other Comprehensive Income (Loss)
Other comprehensive income (loss) for fiscal years 2025 and 2024 resulted primarily from foreign currency translation adjustments related to assets and liabilities and the translation of the statements of income related to revenue, costs and expenses of our subsidiaries whose functional currency is not the U.S. dollar. When the functional currency in our international subsidiaries is the local currency and not U.S. dollars, the assets and liabilities of such subsidiaries are translated to U.S. dollars at the exchange rate on the balance sheet date, and revenue, costs and expenses are translated at average rates of exchange in effect during the period. The corresponding translation gains and losses are recorded as a component of accumulated other comprehensive income or loss. These adjustments will not affect net income until the sale or liquidation of the underlying investment. The reported other comprehensive income or loss reflects the unrealized increase or decrease in the value in U.S. dollars of the net assets of the subsidiaries as of the date of the balance sheet, which will vary from period to period as exchange rates fluctuate.
Years Ended
August 31,
August 31,
Amount
Change From Prior Year
% Change
Amount
Other Comprehensive Income (Loss)
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LIQUIDITY AND CAPITAL RESOURCES
Financial Position and Cash Flow
Our operations have historically supplied us with a significant source of liquidity. We generate cash from operations primarily through net merchandise sales and membership fees. Cash used in operations generally consist of payments to our merchandise vendors, warehouse club and distribution center operating costs (including payroll, employee benefits and utilities), as well as payments for income taxes. Our cash flows provided by operating activities, supplemented with our long-term debt and short-term borrowings, have generally been sufficient to fund our operations while allowing us to invest in activities that support the long-term growth of our operations. We also have returned cash to stockholders through a semiannual dividend, a one-time special dividend in the third quarter of fiscal year 2024, and by repurchasing shares of our common stock pursuant to the stock repurchase program we commenced in the fourth quarter of fiscal year 2023 and completed in the first quarter of fiscal year 2024. We may consider funding alternatives to provide additional liquidity if necessary. Refer to Part II. “Item 8. Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements, Note 11 - Debt” for additional information regarding our available short-term facilities, short-term and our long-term borrowings, and any repayments.
Repatriation of cash and cash equivalents held by foreign subsidiaries may require us to accrue and pay taxes for certain jurisdictions. If we decide to repatriate cash through the payment of a cash dividend by our foreign subsidiaries to our domestic operations, we will accrue taxes if and when appropriate.
The following table summarizes the cash and cash equivalents, including restricted cash, held by our foreign subsidiaries and domestically (in thousands):
August 31,
August 31,
Amounts held by foreign subsidiaries
Amounts held domestically
Total cash and cash equivalents, including restricted cash
The following table summarizes the short-term investments held by our foreign subsidiaries and domestically (in thousands):
August 31,
August 31,
Amounts held by foreign subsidiaries
Amounts held domestically
Total short-term investments
As of August 31, 2025 and August 31, 2024, there were no certificates of deposit with a maturity of over one year held by our foreign subsidiaries or domestically.
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From time to time, we have experienced a lack of availability of U.S. dollars in certain markets (U.S. dollar illiquidity). This impedes our ability to convert local currencies obtained through merchandise sales into U.S. dollars to settle the U.S. dollar liabilities associated with our imported products or otherwise fund our operations. For instance, since fiscal year 2017, we have experienced this situation in Trinidad and have been unable to source a sufficient level of tradable currencies. We are working with our banks in Trinidad and government officials to convert all of our Trinidad dollars into tradable currencies. Our balance as of August 31, 2025 of Trinidad dollar denominated cash and cash equivalents and short and long-term investments measured in U.S. dollars was $59.7 million. While we are currently able to source substantially all the U.S. dollars that we need in Honduras, we faced similar U.S. dollar liquidity challenges in Honduras during fiscal year 2023 through much of fiscal year 2025 and the Central bank still has strict controls there on the availability of U.S. dollars. Refer to “Management’s Discussion & Analysis – Factors Affecting Our Business” and "Quantitative and Qualitative Disclosures about Market Risk" for quantitative analysis and discussion.
Our cash flows are summarized as follows (in thousands):
Years Ended
August 31,
August 31,
Change
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
Effect of exchange rates
Net increase (decrease) in cash, cash equivalents
Net cash provided by operating activities totaled $261.3 million and $207.6 million for the twelve months ended August 31, 2025 and 2024, respectively. Net cash provided by operating activities increased primarily due to a net change in our various operating assets and liabilities which contributed $19.4 million. Shifts in working capital resulting from changes in our merchandise inventory and accounts payable positions contributed $17.7 million to the overall increase. The primary cause of this was a lower year-over-year increase in inventory compared to the prior year due to two additional clubs that opened in fiscal year 2025 compared to three in fiscal year 2024. Additionally, an increase in net income without non-cash items contributed $16.6 million of cash provided for the twelve months ended August 31, 2025.
Net cash used in investing activities totaled $128.9 million and $175.5 million for the twelve months ended August 31, 2025 and August 31, 2024, respectively. The $46.6 million decrease in cash used in investing activities is primarily due to a net decrease in purchases less proceeds of short-term investments of $35.4 million and a decrease in additions to property and equipment of $10.4 million. We opened two warehouse clubs during fiscal year 2025 compared to three warehouse clubs in fiscal year 2024.
Net cash provided by financing activities totaled $14.2 million and net cash used in financing activities totaled $150.0 million for the twelve months ended August 31, 2025 and 2024, respectively. The $164.2 million shift from cash used in to cash provided by financing activities is primarily the result of a $65.4 million increase in proceeds from long-term bank borrowings net of repayments of long-term bank borrowings, a $66.8 million decrease in purchases of treasury stock, and a $27.4 million decrease in cash dividend payments. During the fourth quarter of fiscal year 2025, the Company entered into loan agreements in the United States as well as its Trinidad and Guatemala subsidiaries for $92.9 million. Refer to Part II. “Item 8. Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements, Note 11 - Debt” for further discussion. During the first quarter of fiscal year 2024, the Company repurchased shares of common stock under a share repurchase program. Additionally, during fiscal year 2024, the Company paid a special dividend in April 2024 in addition to the Company's annual cash dividend declared in February 2024.
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The following table summarizes the dividends declared and paid during fiscal years 2025, 2024 and 2023 (amounts are per share):
First Payment
Second Payment
Declared
Amount
Record
Date
Date
Paid
Amount
Record
Date
Date
Paid
Amount
On February 6, 2025, the Company's Board of Directors declared an annual cash dividend in the total amount of $1.26 per share, with $0.63 per share paid on February 28, 2025 to stockholders of record as of February 18, 2025 and $0.63 per share paid on August 29, 2025 to stockholders of record as of August 15, 2025. The declaration of future dividends (ongoing or otherwise), if any, the amount of such dividends, and the establishment of record and payment dates is subject to final determination by the Board of Directors at its discretion after its review of the Company’s financial performance and anticipated capital requirements, taking into account the uncertain macroeconomic conditions on our results of operations and cash flows.
Capital Expenditures
Capital expenditures were $158.1 million for the year ended August 31, 2025, with maintenance and growth expenditures of $82.1 million and $76.0 million, respectively. Capital expenditures for fiscal year 2024 were $168.5 million, with maintenance and growth expenditures of $72.3 million and $96.2 million, respectively. In the third quarter of fiscal year 2025, we purchased land and plan to open our sixth warehouse club in the Dominican Republic, located in La Romana. Maintenance expenditures are typically for operational fixtures and equipment, building refurbishment, solar, technology and other expenses. Growth expenditures are for new clubs, purchases of previously leased clubs, investments to move existing clubs to better locations, supply chain improvements, and major remodels and expansions.
Short-Term Borrowings and Long-Term Debt
Our financing strategy is to ensure liquidity and access to capital markets while minimizing our borrowing costs. The proceeds of these borrowings were or will be used for general corporate purposes, which may include, among other things, funding for working capital, capital expenditures, acquisitions, dividends and repayment of existing debt. Refer to Part II. “Item 8. Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements, Note 11 - Debt” for further discussion.
Future Lease and Other Commitments
We place a strong emphasis on managing future lease commitments related to various facilities and equipment that support our operations. Based on our current liquidity and cash flow projections, we believe we will have sufficient cash to cover future lease commitments. As of August 31, 2025, we have signed one lease agreement for a facility to be built by the lessor which has not yet commenced. Refer to Part II. "Item 8. Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements, Note 9 - Commitments and Contingencies" for further discussion.
Derivatives
Please refer to Part II. “Item 8. Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements, Note 13 – Derivative Instruments and Hedging Activities” for further discussion.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have had, or are reasonably likely to have, a material current or future effect on its financial condition or consolidated financial statements.
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Repurchase of Common Stock and Reissuance of Treasury Shares Related to Employee Stock Awards
At the vesting dates for restricted stock awards to our employees, we repurchase a portion of the shares that have vested at the prior day's closing price per share and apply the proceeds to pay the employees' tax withholding requirements, not to exceed the maximum statutory tax rate, related to the vesting of restricted stock awards. The Company expects to continue this practice going forward.
Shares of common stock repurchased by us are recorded at cost as treasury stock and result in the reduction of stockholders’ equity in our consolidated balance sheets. We may reissue these treasury shares in the future.
The following table summarizes the equity securities repurchased as part of the Company's stock-based compensation programs during fiscal years 2025, 2024 and 2023:
Years Ended
August 31,
August 31,
August 31,
Shares repurchased
Cost of repurchase of shares (in thousands)
We reissued 65,000 treasury shares as part of our stock-based compensation programs during fiscal year 2025, 3,000 treasury shares during fiscal year 2024 and 6,333 treasury shares during fiscal year 2023.
Share Repurchase Program
In July 2023 we announced a program authorized by our Board of Directors to repurchase up to $75 million of our common stock. We began repurchases in the fourth quarter of fiscal year 2023 and successfully completed the share repurchase program in the first quarter of fiscal year 2024. We purchased a total of approximately 1,007,000 shares of our common stock under the program. The repurchases were made on the open market pursuant to a trading plan established pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, which permitted us to repurchase common stock at a time that we might otherwise have been precluded from doing so under insider trading laws or self-imposed trading restrictions. We have no plans to continue repurchases or adopt a new repurchase plan at this time. However, the Board of Directors could choose to commence another program in the future at its discretion after its review of the Company’s financial performance and anticipated capital requirements. During fiscal year 2025, the Company did not repurchase shares under a share repurchase program.
Share repurchase activity under the Company’s repurchase programs for the periods indicated was as follows (total cost in thousands):
Years Ended
August 31,
August 31,
Number of common shares acquired
Average price per common share acquired
Total cost of common share acquired
For further information, refer to Part II. “Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.”
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Critical Accounting Estimates
The preparation of our consolidated financial statements requires that management make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Some of our accounting policies require management to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Management continues to review its accounting policies and evaluate its estimates, including those related to business acquisitions, contingencies and litigation, income taxes, value added taxes, and long-lived assets. We base our estimates on historical experience and on other assumptions that management believes to be reasonable under the present circumstances. Using different estimates could have a material impact on our financial condition and results of operations.
The accounting policies described below involve a significant degree of judgment and complexity. Accordingly, we believe these are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations. For further information, refer to Part II. “Item 8. Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements, Note 2 - Summary of Significant Accounting Policies.”
Income Taxes
We account for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carry-forwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized.
As of August 31, 2025, we evaluated our deferred tax assets and liabilities and determined that a valuation allowance was necessary for certain deferred tax asset balances, primarily because of the existence of significant negative objective evidence, such as the fact that certain subsidiaries are in a cumulative loss position for the past three years, indicating that certain net operating loss carry-forward periods are not sufficient to realize the related deferred tax assets. We also specifically considered whether foreign tax credit balances could be utilized in the foreseeable future in light of current and future U.S. tax liabilities. We have historically applied foreign tax credits, generated from taxes withheld on certain payments PriceSmart receives from our foreign subsidiaries, to reduce U.S. income tax liabilities. We expect foreign tax credits generated to exceed U.S. income tax liability for the foreseeable future. Therefore, for the twelve-month period ended August 31, 2025 and August 31, 2024, we have recorded valuation allowances of $7.0 million and $12.5 million against our foreign tax credits, respectively.
We are required to file federal and state income tax returns in the United States and income tax and various other tax returns in multiple foreign jurisdictions, each with changing tax laws, regulations and administrative positions. This requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. We record the benefits of uncertain tax positions in our financial statements only after determining it is more likely than not the uncertain tax positions would sustain challenge by taxing authorities, including resolution of related appeals or litigation processes, if any. We develop our assessment of an uncertain tax position based on the specific facts and legal arguments of each case and the associated probability of our reporting position being upheld, using internal expertise and the advice of third-party experts. However, our tax returns are subject to routine reviews by the various taxing authorities in the jurisdictions in which we file our tax returns. As part of these reviews, taxing authorities may challenge, and in some cases presently are challenging, the interpretations we have used to calculate our tax liability. In addition, any settlement with the tax authority or the outcome of any appeal or litigation process might result, and in some cases has resulted, in an outcome that is materially different from our estimated liability. When facts and circumstances change, we reassess these probabilities and record any changes in the consolidated financial statements as appropriate. Variations in the actual outcome of these cases could materially impact our consolidated financial statements.
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Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. In evaluating our ability to recover our deferred tax assets in the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future taxable income, we begin with historical results and incorporate assumptions about the amount of future state, federal, and foreign pretax operating income adjusted for items that do not have tax consequences. The assumptions about future taxable income require the use of significant judgment and are consistent with the plans and estimates we are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income. There were no material changes in our uncertain income tax positions for the period ended on August 31, 2025.
Tax Receivables
We pay Value Added Tax (“VAT”) or similar taxes, income taxes, and other taxes within the normal course of our business in most of the countries in which we operate related to the procurement of merchandise and/or services we acquire and/or on sales and taxable income. VAT is a form of indirect tax applied to the value added at each stage of production (primary, manufacturing, wholesale and retail). This tax is similar to, but operates somewhat differently than, sales tax paid in the United States. We generally collect VAT from our Members upon sale of goods and services and pay VAT to our vendors upon purchase of goods and services. Periodically, we submit VAT reports to governmental agencies and reconcile the VAT paid and VAT received. The net overpaid VAT may be refunded or applied to subsequent returns, and the net underpaid VAT must be remitted to the government.
With respect to income taxes paid, if the estimated income taxes paid or withheld exceed the actual income tax due this creates an income tax receivable. In most countries where we operate, the governments have implemented additional collection procedures, such as requiring credit card processors to remit a portion of sales processed via credit and debit cards directly to the government as advance payments of VAT and/or income tax. This collection mechanism generally leaves us with net VAT and/or income tax receivables, forcing us to process significant refund claims on a recurring basis. These refund or offset processes can take anywhere from several months to several years to complete, depending on the country.
The Company's continued persistent efforts to recover the entirety of its VAT receivables resulted in significant refunds during fiscal year 2025. In one market, the Company was successful in collecting $4.8 million in cash refunds for periods extending from fiscal years 2018 to 2020. In another market, the Company received approval for an additional $4.3 million in cash refunds for periods extending from fiscal years 2019 to 2020.
Minimum tax rules, applicable in some of the countries where the Company operates, require the Company to pay taxes based on a percentage of sales if the resulting tax were greater than the tax payable based on a percentage of income (Alternative Minimum Tax or "AMT"). This can result in AMT payments substantially in excess of those the Company would expect to pay based on taxable income. As the Company believes that, in one country where it operates, it should only be ultimately liable for an income-based tax, it has accumulated income tax receivables of $10.5 million and $10.9 million and deferred tax assets of $3.9 million and $3.4 million as of August 31, 2025 and August 31, 2024, respectively, in this country.
The Company’s various outstanding VAT receivables and/or income tax receivables are based on individual procedures or appeals with their own set of facts and circumstances. The Company consults with legal and tax advisors regularly to understand the strength of its legal arguments and probability of successful outcomes in addition to its own experience handling these complex tax issues. While the rules related to refunds of income tax receivables in some of the countries where the Company operates are unclear and complex, the Company has not placed any type of allowance on the recoverability of the remaining tax receivables or deferred tax assets, because the Company believes that it is more likely than not that it will ultimately succeed in its refund requests. Similarly, we have not placed any recoverability allowances on tax receivables that arise from payments we are required to make pursuant to tax assessments that we are appealing because we believe it is more likely than not that we will ultimately prevail in the related appeals. There can be no assurance, however, that the Company will be successful in recovering all tax receivables or deferred tax assets.
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Our policy for classification and presentation of VAT receivables, income tax receivables and other tax receivables is as follows:
• Short-term VAT and Income tax receivables, recorded as Prepaid expenses and other current assets: This classification is used for any countries where our subsidiary has generally demonstrated the ability to recover the VAT or income tax receivable within one year. We also classify as short-term any approved refunds or credit notes to the extent that we expect to receive the refund or use the credit notes within one year.
• Long-term VAT and Income tax receivables, recorded as Other non-current assets: This classification is used for amounts not approved for refund or credit in countries where our subsidiary has not demonstrated the ability to obtain refunds within one year and/or for amounts which are subject to outstanding disputes. An allowance is provided against VAT and income tax receivable balances in dispute when we do not expect to eventually prevail in our recovery of such balances. We do not currently have any allowances provided against VAT and income tax receivables.
Long-lived Assets
We evaluate quarterly our long-lived assets for indicators of impairment. Indicators that an asset may be impaired are:
• the asset's inability to continue to generate income from operations and positive cash flow in future periods;
• loss of legal ownership or title to the asset;
• significant changes in its strategic business objectives and utilization of the asset(s); and
• the impact of significant negative industry or economic trends.
Management's judgments are based on market and operational conditions at the time of the evaluation and can include management's best estimate of future business activity, which in turn drives estimates of future cash flows from these assets. These periodic evaluations could cause management to conclude that impairment factors exist, requiring an adjustment of these assets to their then-current fair market value. Future business conditions and/or activity could differ materially from the projections made by management causing the need for additional impairment charges. We did not record any significant impairment charges during fiscal year 2025 related to the loss of legal ownership or title to assets; significant changes in the Company's strategic business objectives or utilization of assets; or the impact of significant negative industry or economic trends. Loss on disposal of assets recorded during the years reported resulted from improvements to operations and normal preventive maintenance.
