PriceSmart posts 14% sales hike

PriceSmart Philippines (PSMT) posted a 14- percent increase in its second quarter sales for its fiscal year that starts from September 2004 and ends August 2005, according to PSMT Philippines Inc. president Benjamin M. Woods.

For its first quarter sales the increase had been only six percent, Woods said.

The much higher growth in sales in the second quarter, Woods said, is due to its increased importation of US products which is Price-Smart’s strength.

All four of PriceSmart’s outlets in the country, Woods said, are full of stock of recently imported US products.

But while the bulk or about 70 percent of PriceSmart’s offerings are US products, it also carries about 30-percent local goods.

Woods, however, could not divulge actual revenues as US regulations prevent him from doing so.

In a meeting with business reporters, Woods also clarified recent misleading articles concerning the buyout of PSMT’s loan from the International Finance Corp. (IFC) and a parallel shareholder dispute in Guatemala.

Woods clarified that it was actually PSMT Philippines Inc. which bought out its remaining $10.4-million loan from the IFC, specifically because the company has money to reduce its debt and secure lower interest rates from its creditors.

IFC had originally lent PSMT $12.5 million, maturing in June 2012 and payable semi-annually at a fixed rate of 7.44 percent.

IFC, the private sector investment arm of the World Bank, participates in private business ventures to bolster the credibility of the project and enable it to gain easy access to financing and capital.

However, it was reported that US-based PriceSmart had bought PSMT’s remaining $10.4-million loan from IFC to help PSMT improve its balance sheet.

PSMT Philippines minority shareholder William S. Go had questioned the loan buyout, commenting, "why is there a need for the mother company in the US to absorb the loan in the first place? It only shows lack of confidence on the ability of the Philippine unit to pay off the indebtedness."

Woods assured that if PSMT had financial problems, it would not have been able to reduce its debt.

PriceSmart, Woods reiterated, "is committed to stay in the Philippines and has no intention of closing in spite of its current corporate spat with a minority shareholder."

According to Woods, "we are here for the long-term."

While the Philippine operations of PriceSmart is still not profitable, Woods said, the company is still in its infancy and is prepared for losses.

Woods disclosed that in other locations of PriceSmart, the company allocates three to four years before expecting to post a profit. PriceSmart’s Philippines operations, Woods pointed out, will be celebrating its fourth year this year.