PriceSmart Shares Plunged: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of shopping warehouse club operator PriceSmart (NAS: PSMT) weren't looking all that bright to investors today as they fell as much as 24% in intraday trading after the company reported fiscal fourth-quarter earnings.

So what: There were definitely some highlights from PriceSmart's quarter. For one, total revenue was up 22% from last year and topped Wall Street's estimates. Comparable-store sales are also looking darn good, gaining 18.9% for the eight weeks ending Oct. 30.

However, those bright spots were overshadowed by a very nasty negative. Despite the strong sales growth, operating income fell 7% from last year and earnings per share clocked in at $0.42, well below the $0.54 that analysts were looking for.

Now what: Management didn't provide an explanation for the profit shortfall, but it was pretty easy to see that it was a matter of rising operations costs at the warehouse clubs as well as higher costs for the goods that PriceSmart was selling. Though many investors seem to be taking a "shoot first and ask questions later" attitude today, one quarter hardly makes a trend. PriceSmart investors will want to stay tuned to make sure the company is able to get costs back under control in the quarters ahead.

Want to keep up to date on PriceSmart?Add it to your watchlist.

At the time this article was published Motley Fool newsletter services have recommended buying shares of PriceSmart. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.

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