Good day, and welcome to PriceSmart, Incorporated Earnings Release Conference Call for the Fourth Quarter of Fiscal Year 2018, ending on August 31, 2018. All participants are currently in a listen-only mode. After remarks from our company representatives, Robert Price, Executive Chairman of the Board of Directors; Sherry Bahrambeygui, Director; Jose Luis Laparte, President and Chief Executive Officer; and Maarten Jager, Executive Vice President and Chief Financial Officer, you will be given an opportunity to ask questions as time permits. [Operator Instructions] As a reminder, this conference call is being recorded on Friday, October 26, 2018. A digital replay will be available through November 2, 2018, following the conclusion of the call by dialing 1 877 344-7529 for domestic callers or 1 412 317-0088 for international callers, and entering replay access code 10123807. I would now like to turn the conference over to Maarten Jager. Please go ahead, sir.

Thank you, and welcome to our earnings call for the fourth quarter of fiscal year 2018. We will be discussing the information that we provided in our earnings press release and our 10-K, both of which we released yesterday, October 25, 2018. You can find both press releases and the 10-K filing on our website, www.pricesmart.com. Please note that statements made during this call may contain forward-looking statements concerning the company's anticipated future plans, revenues, and related matters. These forward-looking statements include, but are not limited to, statements containing the words expect, believe, will, may, should, estimate and similar expressions. These statements are subject to risks and uncertainties that could cause actual results to differ materially, including the risks detailed in the company's annual report on Form 10-K for the fiscal year ended August 31, 2017, filed with the Securities and Exchange Commission on October 25, 2018. We assume no obligation and expressly disclaim any duty to update any forward-looking statement to reflect the occurrence of events or circumstances, which may arise after the date of this call. Now, I will turn it over to Jose Luis Laparte, PriceSmart's President and Chief Executive Officer.

Good morning, everyone, and thank you for joining us today. As it was announced yesterday afternoon in our press release after discussions with the board regarding the need for a fresh perspective, on Wednesday this week I submitted my resignation as President and CEO, and the board accepted it. This was not easy after spending the last 14 years working together with such a great team, after those 14 years I accomplished what I set out to do on this company. We were doing less than $500 million on sales, when I joined this team. And as we finished fiscal year 2018, our sales exceeded at $3 billion mark, a major milestone for our business. This journey with PriceSmart has been full of great experiences. I had the opportunity to meet and work with many people from each of our country. PriceSmart has a great future ahead of it, and the team well positioned for growth. I am proud of the almost 9,000 employees we have in the U.S. and our 13 countries. My resignation is effective November 16, I have agreed to make myself available to Sherry Bahrambeygui, the new Interim CEO, until the end of year to ensure as more transition. I know very well for many years, and I am sure, she would do a great job working with all the team on this transition. This is my last earnings call. And I want to thank all of you and also the PriceSmart team for all of your support. Thank you very much. And now - I'll now turning over to Sherry Bahrambeygui.

Good morning, everyone. I'm Sherry Bahrambeygui, and it's a pleasure to meet you by way of this call. I'm the Director of PriceSmart and the incoming Interim CEO. First, I'd like to thank Jose Luis for all his contributions to the company throughout the many years that he has served PriceSmart. He leaves the company on very solid footing. We've got a very strong balance sheet, very strong cash position, we have a very little leverage, and we've got one of the best-in-class teams of over 8,000 employees. Jose Luis was exactly the right person in the history of our company, he came to us at the right time, and he was able to accomplish amazing things for us. But as the world of retailing is changing and the world of merchandising is rapidly changing. There is an agreement amongst us that it is time for a fresh perspective and a CEO, a leader who can bring a different set of skills to the company to help expedite our growth. As the Interim CEO, I just want to briefly tell you my priorities will be to focus on - the effort to identify as best-in-class CEO for the company to take it forward in the future. To focus and invest on talent development amongst our management team and to really invest in those key players, who we feel have great gifts and talents to bring this company forward. And also to expedite our growth strategies, to remove and accelerate our efforts in terms of our growth for the future and to be responsive to the needs of the future and the needs of our members. Removing obstacles and accelerating those efforts will include embedding and integrating the assets that we acquired, when we acquired Aeropost. Bringing their talent, and their team and their capabilities closer in line with our core business is going to be a key feature of our growth strategy for the future. So with that, I'd like to hand this off to our executive - our new executive Chairman, Robert E. Price, who is the founder of our company and also one of the founders of the club concept over 40 years ago. He is a thought leader in our organization and he is part of what will be a very smooth transition, moving forward for the company.

Thank you very much, Sherry. I'd like to - well, good morning everyone. I'd like to comment a little bit about Sherry Bahrambeygui, who I have worked with for the past 13 years. I've the highest regard for Sherry, her integrity, her intelligence, her desire to be successful. Everything that Sherry has worked on and many of those things have been company related. Sherry has done successfully and has benefited the company in many ways. She is the chair of the Compensation Committee. She's on the Real Estate Committee. She attends Audit and Finance Committee meetings. She has an intimate knowledge of the company. And I have tremendous confidence in her to work through this period of transition in a way that it will make sure that we come out successfully. I'd also like to take this opportunity to thank, Jose Luis, who I've worked with for 14 years. I hired, Jose Luis, and he was absolutely the right person at the right time. He was able to take a company that was really in trouble. Although, we've gotten the balance sheet, right, we still have a lot of operational issues, and Jose Luis did a remarkably fine job of bringing this company to the point that we're doing $3 billion today. So I thank you, Jose Luis, for everything you've done. And all of us, the Board of Directors and our investors and our employees, owe you a great gratitude. My job as the Executive Chairperson, really are two main functions: one is to set the strategic vision for the company; and the second is to make sure that the CEO succession is handled properly. Those are the two things that I will devote myself to in the next few months. I do want to kind of leave it for now with and turn it back to Maarten, but we'll make additional remarks about the vision and some of our strategic considerations going forward, when Maarten has concluded his remarks. And then, we'll be open for questions from all of you.

Thank you, Robert. Good morning, everyone, and thank you again for joining us today. I also want to personally congratulate, Jose Luis, and leading this business $2 billion to $3 billion milestone. And I wish Jose Luis the very best in the future. This achievement underscores the strength of our business model, which is predicated on delivering excellent merchandise and outstanding value in the most efficient manner possible to our members. By focusing on efficiency, we are able to pass its value back to our members. Historically, we've seen that manifested through an efficient supply chain, pallet-driven merchandising and large boxes with concrete floors and steels. That model remains strong, and a guiding strategic principles remain the same as we continue to harness opportunities ahead of us now, and we are continuing to advance an innovator model. Our Executive Chairman, Robert Price, he just mentioned, who will comment more on the vision for our company later. Let me now turn to our results. First with an overview of Q4 and fiscal year, and then followed by some more color for the most recent quarter. Total revenues for $777.9 million, an increase of 6.0% over the comparable prior year period, which includes the contribution from the Aeropost business this quarter - this year - this quarter. Net merchandise sales were $741.3 million, an increase of 4.3% over the prior year period, and comparable net merchandise sales grew by 0.2%. As a reminder, we ended the fiscal year with 41 warehouse clubs compared to 39 clubs a year-ago with the addition of the Santa Ana club in Costa Rica in October 2017 and San Isidro club in the Dominican Republic in May of 2018. Net income for the fourth quarter of fiscal year 2018 was $19.8 million or $0.62 per share compared…

Thank you very much, Maarten. I'd like to begin by stating that the company overall condition is excellent. We are serving our members well, we have a high renewable rate in our membership. We have a strong balance sheet as Maarten just mentioned in our underlying performance as to the basic business was sound last year very good, except for the fact that the overlay of the tax and Aeropost factors created a general reduction in our earnings. But the underlying business was sound. There's something - I think is very important to emphasize to the investment community and that is the fact that during this last year, we have significantly strengthened our management team. I'd like to specifically mention the addition of our Chief Financial Officer, Maarten Jager, who - we feel is, a tremendously strong addition to the team. I also want to mention, Ana Luisa Bianchi, who is our new Chief Merchandising Officer. Ana Luisa began with the company in Guatemala nearly 20 years ago, and has occupied a number of very important merchandising positions in our company and I believe will have a very positive impact in the buying area. In technology, one of the most important parts of that Aeropost acquisition is the team that is now part of our PriceSmart organization, and that team both in terms of marketing, technology and overall understanding of online business. We hope will be very significant as it plays out with respect to our entire operation for our members. And then, as I mentioned earlier the addition of Sherry, as the new Interim CEO is very, very positive. I really - I worked with Sherry and I feel that the fact that we have worked together, [worked] [ph] together well, will serve the company quite well. I think,…

Operator, we'll now turn it over to Q&A.

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Jon Braatz with Kansas City Hospital. Please go ahead, Jon.

Kansas City Capital. First of all, Jose Luis, I wish you the best of luck. I enjoyed working with you and - had the chance to meet with you in Bahrambeygui. I wish you the best of luck.

Thank you.

Robert, a little bit on your strategy, you talked about you listed three or four points that you want to engage in. How much will all this cost? Can you give us an idea of what the capital investment might be to complete these tasks that you've listed?

Well, many of the things I talked about, I don't think our incremental cost at all. I think, it has to do with just getting back to basics and doing our business better.

Okay. All right. And then secondly, one of the underlying concepts that PriceSmart has always been to when you generate cost savings, you pass that on to the consumer in terms of lower prices. Are you going to deviate at all with that policy? Or you continue to pass it all on to the consumer? Or are you going to maybe keep a little bit?

I'm going to explain to you, why we have that policy. I want to tell what business reason there is. When my dad started FedMart, and then we started Price Club. We had one basic tenant, which is that we have a fiduciary responsibility to our shoppers, our members, and they have to trust us. So we want our members to develop a sense and this is happened - certainly happened to Price Club and Costco. At anything we put out for sale, is there - is they can trust the integrity of the pricing. We're not holding back. And my father also said, and I really believe this, if you're going to make a mistake in pricing, you always make the mistake in favor of the customer, not in favor of yourself. So the third - and the third point is that we're in a competitive world. We're in a world with Amazon, forget the local guys, we've got Walmart, but you have big players, who are very fierce competitors. And one of the things that we do not want to do is create what we call an umbrella, so that we give them room to raise margin, so that they can attack us on other products. Our strategy is to take everything we can in terms the efficiency in buying and keep the lid as tight as we can. So it discourages competitors from coming into our market and for the competitors that are already there make their lives miserable. And that is the way we think about it.

Okay. Thank you, Robert I appreciate that color. Maarten, one question. In the third quarter your gross margin on Aeropost - gross margins were about 78%. On the fourth quarter, they were about 45% or something like that. What changed in terms of the margin on your Aeropost sales in the fourth quarter?

Jon, let me take that offline and just make sure that I get all those numbers right. And we'll get back with you later today, okay.

All right. No problem. Thank you.

Our next question comes from Ronald Bookbinder with IFS Securities. Please go ahead, Ronald.

Yes. Good afternoon and thank you for taking my questions. First, yes, Jose Luis, congratulations on what a terrific job you have done over the years. The stock price really shows that from when you came onboard. My first question is, this is a pretty massive plan that you're shifting to. How many years do you think it is going to take to pretty much get to most of your vision?

Well, I'm 76 years old. My dad used to say, he doesn't buy green bananas anymore. And I guess, when you talk about it in years, it makes me nervous.

So you're planning a pretty quick transition to the new focus and execution?

Yeah, I mean, why do you want to wait?

Exactly. Are there competitors that are aggressively coming into your territories with a similar strategy that you're trying to fend off right now? Or is this more getting out really ahead of the competition?

It's not a react - this is not a reactive strategy. This is really doing especially in the world as it is today, and trying to come up with proper answers to how you compete and how you serve your members.

So as you look at investments going forward, store growth versus online, should we look for a real slowdown in store growth as you build out and sort of shift direction to more online? And then later on, look us to market where you might need a store to help support your omni-channel vision in that market?

You can't disaggregate the stores from the online. They're really all part of a whole. And so the future is, how do you take both facets of retailing, and in our case of wholesaling and put them together in a way that works. That's what we're all of us, all the people in this - in the retail world are trying to figure out, Costco, everybody, and even Alibaba is beginning to buy stores. So it's really a question, what is that sweat spot week between - and how do you make sure that you can integrate properly the technology - the benefits of technology with the traditional ways in which people have been shopping.

With the new, greater emphasis on online, will you focus at any territories, especially stronger than others? Like, will you focus mainly in trying to build this out in Costa Rica, Panama, Colombia first before taking it to smaller markets?

Well, our two tests that we're working on, pilots, I guess, you'd call them, one is in Dominican Republic, and one is in Panama. And I think, it was just a matter of the fact that we were able to identify in each case, locations that seemed to fit of doing the pilot.

But the sort of smaller stores, I guess, you could relate them to the old Sears catalog stores. What you can…

Well, personally, Sears had a catalog and they blew it.

Yes. Sears isn't doing too well these days. But…

They kind of lost their ways, yeah.

Yeah. They used to have those tiny little stores that really didn't have any merchandise in them where they would have catalogs. And you'd come in, these in small world markets, and you pick up what you want and they order, and like you said, click and collect. And so it's just a great little point in the smaller markets. But so when looking at Colombia, we used to look at Colombia and think you guys could have 17 stores in Colombia or somewhere up that when you compare the size of the economy of Colombia to Central America. But so does that change, how you're going to be looking at the Colombian market?

No.

Okay. All right. Okay, but that's about all my questions. It's quite interesting to see the changes going on here and good luck.

Thank you, Ronald.

Our next question comes from Nicolas Alfonso with Compass Group. Please go ahead, Nicolas.

Okay. Thank you for the presentation. My first question is about exchange rate. Currently, the Colombian peso is trading COP3,185. Will this have any effect on your following results? And the second question is about applications or the online business that is developing here strongly. Currently, trending - it's very trendy here in Colombia. Do you have any view about this?

I think - Nicolas, this is Maarten. We had a lot of static on the phone. I think, one of your questions was about FX rates, and the other one was about the online trends in Colombia. Let's take the second question first on the online trends in Colombia.

Yeah. Colombia, over the - this is Jose Luis, Nicolas. Colombia, probably of all the countries, is the one more developed in terms of online business. Obviously, you have [Defalava] [ph], you have Exito, you have other retailers that have been working on strategies for online, especially the leader in food to homes and some of the electronics. It is definitely more aggressive in that country, but we haven't seen a real effects. And I don't think it is at the level of U.S. competition. So hopefully, that's what you were kind of asking about the online business. On the other countries, there is a component of online, definitely not as developed, not in the Caribbean Islands, or not even in some of the bigger Central American countries like Costa Rica or Panama, not bigger us for in terms of business. Colombia is definitely will be run the one more competitive. Then the other question was…

This is Maarten again, in terms of FX rates, I quoted you the number of the Colombia comps. We look at it, of course, on a constant currency basis, although, we are not very chatty about it. But even on a constant currency basis, our Colombia comps were double digits or 10% and change. So we're dealing quite well. Thank you.

Okay. Thank you.

Our next question is a follow-up from Jon Braatz with Kansas City Capital. Please go ahead, Jon.

Last quarter on the conference call, you mentioned that that you ship Roberts with Costa Rica through Nicaragua to Guatemala, Honduras and so on. And there were some concerns about issues going on in Nicaragua? Did you ever have any issues in the quarter moving merchandise through Nicaragua to those other countries or - and did you incur any additional costs to do so?

Yeah, Jon, there was - obviously, the last quarter of the year was pretty rough, because that's exactly when the events in Nicaragua started. So we had a little inconsistency in our shipments during that few weeks. It got more back to normal. We did incur a little bit on more expenses, because we had to go around Nicaragua for some of the shipments. It seems that is more back to normal. Obviously, the Nicaragua is not completely stabilized yet, and it will probably take a little longer. But so far, it hasn't been as difficult as it was in Q4. We don't foresee necessarily those challenges in Q1 of this year. Again, business is, I would say, normal, but not necessarily the normal we would like to see Nicaragua like it was before May. Hopefully, we don't see more disruptions.

Hey, Robert, just a follow-up to you - sorry, Jon. Sorry. There was a question - I apologize. There was a question about Aeropost and the expense.

Yes.

The simple answer really is to look at it from a year-to-date basis, because as we disclosed in the notes in F-11 of the financials Note 1. There was a minor reclass, we made to cost of goods sold during the quarter of approximately $2 million. So you'll see that in the notes, and we can walk you through that later to just clarify that.

Okay. Thank you, Maarten.

So operator, I think, that was the last of the questions. Now over to the operator.

This now conclude the answer-and-question session. This is also conclude the conference. Thank you for attending today's presentation and you may now disconnect.