Good day everyone and welcome to the PriceSmart, Incorporated Earning Release Conference Call for the Third Quarter of Fiscal Year 2020, which ended on May 31, 2020. After remarks from our company representatives, Sherry Bahrambeygui, Chief Executive Officer and Michael McCleary, Chief Financial Officer, you will be given an opportunity to ask questions as the time permits. As a reminder, this conference call is limit to one hour and is being recorded today, Friday, July 10, 2020. A digital replay will be available following the conclusion of today’s call through July 17, 2020 by dialing 1-877-344-7529 for domestic callers or 1-412-317-0088 for international callers by entering replay access code 10143985. For opening remarks, I would now like to turn the call over to PriceSmart’s Chief Financial Officer, Michael McCleary. Please proceed, sir.

Thank you and welcome to the PriceSmart's earnings call for the third quarter of fiscal year 2020. We will be discussing the information that we provided in our earnings press release and our 10-Q, which we both released yesterday afternoon, July 9, 2020. You can find both documents on our Investor Relations website at investors.pricesmart.com where you can also sign up for e-mail alerts. As a reminder, all statements made on this conference call other than statements of historical fact are forward-looking statements concerning the company’s anticipated plans, revenues and related matters. Forward-looking statements include, but are not limited to statements containing the words expect, believe, will, may, should, estimate, and similar expressions. All forward-looking statements are based on current expectations and assumptions as of today, July 10, 2020. 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, 2019 as filed with the Securities and Exchange Commission on October 29, 2019. The company updated those risks in response to the coronavirus outbreak as detailed in the company’s quarterly report on Form 10-Q for the quarter ended February 29, 2020 has filed with the Securities and Exchange Commission on April 8, 2020. These risks may be updated from time-to-time and other filings with the SEC, which are accessible on the SEC's website at www.sec.gov. The company undertakes no obligation to update forward-looking statements made during this call. Now, I will turn the call over to Sherry Bahrambeygui, PriceSmart’s Chief Executive Officer.

Thanks, Michael. Good day, everyone and thank you for joining us. I hope that you and your families are all safe and healthy in these challenging times. During the third quarter of our fiscal year 2020, our company has traversed an extraordinary arc that started with rapidly responding to unexpected challenges created by the pandemic to predicting the needs of our members and of our employees and then swiftly moving to implement ideas and capabilities that we believe will position us well for the future. As addressed on the last Q2 earnings call held on April 9, we organized our focus around a number of major priorities. Those priorities remain the same today; people, supply, demand and cash management, in addition to seizing on opportunities for the future. As to people with our top priority firmly placed on the wellbeing of our employees and our members, the quarter began with rapid adaptation to remote work without compromising effectiveness. Since March, we've successfully off-sited almost all office-based employees in the U.S. and internationally. I believe this early move is a major reason why we can report today that we're aware of only one confirmed COVID case among our office-based employees throughout the company. At the beginning of this last quarter, we identified a group of 16 executives who together oversee all aspects of the company's operations. Until recently this leadership team has met for at least a couple of hours every single day, seven days a week via video conference. This has allowed us to create an efficient communication channel that enabled us to nimbly respond to the rapidly changing dynamics in our 13 different markets. Although, we've now been able to dial back the frequency of these meetings to several times a week, we follow the same format setting many…

Thank you, Sherry. Good morning or afternoon to everyone and thanks for joining us today. As Sherry mentioned, in many ways the pandemic has accelerated some of our plans in addition to quickly evolving our adaptability to unforeseen market conditions. We shifted some of our priorities in the short-term, never losing sight of the tenets of our business model and our long-term goals. While we do expect continued uncertainty in the economies of our 13 markets due to COVID-19 and will continue to proceed cautiously, we will do so with an eye on opportunities to solidify the company and our market position for the future. During the third quarter of fiscal 2020, total revenues were $799.9 million, an increase of 1.4% and net merchandise sales were $768.4 million and grew 1.8%. The third quarter increase in net merchandise sales was driven by a 21.7% increase in average ticket, partially offset by a 16.4% decrease in transactions partially due to capacity and other government restrictions as a result of the COVID-19 pandemic. Comparable net merchandise sales were down 3.6%, which includes the impact of sales transfers to our newly opened clubs in existing markets. Currency negatively impacted both our net merchandise sales and our comparable net merchandise sales by 2.5%. Total gross margin of net merchandise sales was inline with the same quarter last year at 13.9%, but was down during the quarter when compared to recent quarters. The decrease versus recent quarters was largely due to a significant dropoff in sales in our higher margin areas of food service, bakery and optical that were particularly impacted by the pandemic. Total revenue margins decreased 20 basis points to 15.9% compared to 16.1% in the third quarter of fiscal 2019. The slight decrease in total revenue margins is primarily due to lower…

We will now begin the question-and-answer session [Operator Instructions] Our first question comes from Jon Braatz of Kansas City Capital.

Good morning Sherry and Michael.

Good morning.

Sherry, just wanted to touch base with you on gross margins. I know that it came down sequentially to 13.9% and you talked a little bit about the change in merchandise mix driving that. And can you give me -- can you give us a sense as to the proportionality of that -- the change in the margin as a result of the change in merchandise mix? How significant it was, and maybe how quickly you can envision that it rebuilding again from the third quarter level?

Well, our total gross margins of 13.9% were flat with Q3 of last year, but down from where we've -- what we've been achieving in FY 2020. We attribute this in large part to areas of our business. It's not so much the merchandise as it is the fact that we had restrictions on tire service, op, all those types of things that would require more physical contact, our OBs including bakery just the environment is such that you wouldn't have as much gathering and people having -- ordering the cakes as much. And those kinds of things that are generated that would impact gross margins significantly, those areas were most affected. Demos, for example, is another example. Demo income was reduced. But in terms of the margin for our merchandise and the merchandise margins, those have been holding pretty firm and in line with our pricing strategy and consistent with our value proposition and our discipline with the six rights. So, there has been some shift in emphasis from imports to domestic to make sure that we're covering out of stocks. But that's about as much color as I think I can give you on the reason for the margins being at 13.9%.

Do you -- when you look at those higher value-added services like optical and bakery, maybe compared to where you were a month ago, are those services beginning to incrementally improve? Are you seeing some gains in that area versus maybe -- like I said maybe a month ago?

The short answer is yes, but it is a dynamic situation.

Okay.

Because it's highly correlated with the kind of restrictions that we're seeing in the markets and that's why -- because those are the types of services that require more physical contact, and as a result it can be being more impacted by what the more global environment is.

Okay. Are -- do you -- obviously, you operate in a lot of different countries and a lot of different variables, are you seeing any sense that maybe if there is a resurgence of COVID cases or continuing high case -- high level of cases that there might be additional restrictions placed on people in your markets and maybe on your operating hours and so on?

The best answer I can give you is, just like we've handled this entire process over the last three months is that we are getting prepared for all sorts of scenarios. And we think that's the most responsible thing to do, and it puts us in best position to maximize sales and meet the needs of our members. If I were to ask you in the United States what you think is going to happen with the pandemic, it would be a tough question to answer. I think the same holds true [ph] in our markets, but we're clearly seeing that there is a cause and effect. As cases go up, the restrictions tend to be greater, and we don't have a crystal ball. So, the best we can do is prepare our business to be ready and at the ready to be able to best serve our members given any kinds of restrictions that are thrown our way.

Okay. Okay. One last question. From a competitive standpoint, are -- your Click & Go, are you as advanced or more advanced than maybe than some of your competitors? Have you dealt with this do you think from a -- in a better way than -- in a quicker way than some of your competitors?

I don't really spend a lot of time comparing us to our competitors in that regard. All I can tell you is that we've launched, expedited, rolled out in a way that I haven't seen elsewhere, and we're getting very positive reception from our members. We still have a lot of work to do and a lot of upside potential in terms of creating greater efficiencies, and we're learning and we're implementing new ideas to get better and better. We're going to be layering on the delivery aspects to this program, which I think is also going to be well-received by our members. So, all I can tell you is that given the numbers that we saw in June, there seems to be a good response from our members and that there is more potential there.

Okay. Thank you, Sherry.

Thank you.

This concludes the question-and-answer session. I would now like to turn the conference back over to the management team for any closing remarks.

Well, I just like to say thank you to everyone and thank you for the support and for the understanding. We are all in this together. We are learning a lot from this process. And we -- as I said earlier, plan to put it to good use going forward. And I'd like to most especially recognize our employees. Michael?

Yeah. Thank you very much everybody and have a good weekend. Take care.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.