PriceSmart Shares Plunged: What You Need to Know

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.

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