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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K.

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Overview

PriceSmart, headquartered in San Diego, California, owns and operates U.S.-style membership shopping warehouse clubs in Latin America and the Caribbean, selling high quality merchandise and services at low prices to our Members. We operate 51 warehouse clubs in 12 countries and one U.S. territory (nine in Colombia; eight in Costa Rica; seven in Panama; five in the Dominican Republic and Guatemala; four in Trinidad; three each in in Honduras and El Salvador, two each in Nicaragua and Jamaica; and one each in Aruba, Barbados and the United States Virgin Islands). We opened our El Poblado club located in Medellin, Colombia on September 1, 2023. It is the Company's tenth warehouse club in that market bringing the Company's total warehouse club count to 52. The Company also plans to open our sixth warehouse club in Guatemala, located in Escuintla, approximately 40 miles south of the nearest club in the capital of Guatemala City. The Escuintla club is being built on a five-acre property and is anticipated to open on November 30, 2023. We have also purchased land and plan to open our fourth warehouse club in El Salvador, located in Santa Ana, approximately 40 miles west from the nearest club in the capital of San Salvador. The club is being built on a five-acre property and is anticipated to open in early 2024. Once these twonew clubs are open, we will operate 54 warehouse clubs. Our corporate headquarters, U.S. buying operations and regional distribution centers are located primarily in the United States. Our operating segments are the United States, Central America, the Caribbean and Colombia. All intercompany balances and transactions have been eliminated in consolidation.

Mission and Business Strategy

PriceSmart exists to improve the lives and businesses of our Members, our employees and our communities through the responsible delivery of the best quality goods and services at the lowest possible prices. Our mission is to serve as a model company, which operates profitably and provides a good return to our investors, by providing Members in emerging and developing markets with exciting, high-quality merchandise sourced from around the world and valuable services at compelling prices in safe U.S. style clubs and through PriceSmart.com. We prioritize the well-being and safety of our Members and employees. We provide good jobs, fair wages and benefits and opportunities for advancement. We strive to treat our suppliers right and empower them when we can, including both our regional suppliers and those from around the world. We conduct ourselves in a socially responsible manner as we endeavor to improve the quality of the lives of our Members and their businesses, while respecting the environment and the laws of all the countries in which we operate. We also believe in facilitating philanthropic contributions to communities in which we do business. We charge Members an annual membership fee that enables us to operate our business with lower margins than traditional retail stores. As we continue to invest in technological capabilities, we are increasing our tools to drive sales and operational efficiencies. We believe we are well positioned to blend the excitement and appeal of our brick-and-mortar business with the convenience and additional benefits of online shopping and services and, meanwhile, enhance Member experience and engagement.

Factors Affecting the Business

Overall economic trends, foreign currency exchange volatility, and other factors impacting the business

Our sales and profits vary from market to market depending on general economic factors, including GDP growth; consumer preferences; foreign currency exchange rates; political and social conditions; local demographic characteristics (such as population growth); the number of years we have operated in a particular market; and the level of retail and wholesale competition in that market. The economies of many of our markets are dependent on foreign trade, tourism, and foreign direct investments. Uncertain economic conditions and slowdown in global economic growth and investment may impact the economies in our markets, causing significant declines in GDP and employment and devaluations of local currencies against the U.S. dollar.

For fiscal year 2023, inflation in all of our markets and devaluations of local currencies, especially in Colombia for part of the year, created significant headwinds. However, some markets, especially Costa Rica, benefited from currency appreciation which helped offset the currency devaluations we experienced in other countries. Substantial product cost increases due to inflation or commodity price increases have and could continue to impact our financial results and could lead to reduced sales, fewer units sold, and/or margin pressure. Events directly or indirectly related to the novel coronavirus outbreak (COVID-19) have resulted in market and supply-chain disruptions. These factors have increased the complexity of managing our inventory flow and business; however, during fiscal year 2023, we saw a general improvement in transit days and a reduction in freight rates of our shipping containers. We are working to hold down and/or mitigate the price increases passed on to our Members while maintaining the right inventory mix to grow sales. One key mitigating factor has been our expanded network of distribution centers, which has facilitated alternative shipping routes, increased throughput, and provided flexibility to mitigate our supply chain challenges and risks more effectively.

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Currency fluctuation can be one of the largest variables affecting our overall sales and profit performance, as we have experienced in prior fiscal years, because many of our markets are susceptible to foreign currency exchange rate volatility. During fiscal year 2023, approximately 78.8% of our net merchandise sales were in currencies other than the U.S. dollar. Of those sales, 48.4% consisted of sales of products we purchased in U.S. dollars.

A devaluation of local currency reduces the value of sales and membership income that is generated in that country when translated to U.S. dollars for our consolidated results. In addition, when local currency experiences devaluation, we may elect to increase the local currency price of imported merchandise to maintain our target margins, which could impact demand for the merchandise affected by the price increase. We may also modify the mix of imported versus local merchandise and/or the source of imported merchandise to mitigate the impact of currency fluctuations. Our Colombia market experienced significant foreign currency devaluation during the first three quarters of fiscal year 2023 compared to fiscal year 2022. Notwithstanding inflation and this currency devaluation in Colombia, beginning in the third quarter of fiscal year 2023, we strategically decreased sales prices in select items across all of our imported merchandise categories in Colombia. During the fourth quarter of fiscal year 2023, the Colombian peso began to appreciate against the U.S. dollar and stabilize, but we continue to maintain our pricing actions in the meantime. Despite the foreign currency difficulties, we continue to see Colombia as a key market for growth and have continued to invest in this market, recently opening our tenth warehouse club in the country, located in Medellín. Information about the effect of local currency devaluations is discussed further in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Net Merchandise Sales and Comparable Sales.”

Our wallet-share capture of total retail and wholesale sales can vary from market to market due to competition and the availability of other shopping options for our Members. Demographic characteristics within each of our markets can affect both the overall level of sales and future sales growth opportunities. Certain island markets, such as Aruba, Barbados and the U.S. Virgin Islands, offer limited upside for sales growth given their overall market size.

We continue to face the risk of political instability which may have significant effects on our business. For example, roadblocks were set up in Guatemala in October 2023 due to election results, limiting access to certain of our warehouse clubs. In addition, roadblocks also arose in Panama in October 2023 disrupting traffic to our clubs throughout most of the market as a reaction to an agreement between the Panamanian government and a mining company. Civil unrest in Colombia in response to tax reform and austerity measures paralyzed significant portions of the country’s infrastructure as roadblocks and riots disrupted normal economic activity during the third quarter of fiscal year 2021. Nicaragua and Honduras experienced anti-government protests in 2019; Costa Rica also had a general strike against tax reform measures that significantly impeded regular economic activity in 2018.

Our operations are subject to volatile weather conditions and natural disasters. In November 2020, Hurricanes Eta and Iota brought severe rainfall, winds, and flooding to a significant portion of Central America, especially Honduras, which caused significant damage to parts of that country’s infrastructure. Although our warehouse clubs were not significantly affected and we were able to manage our supply chain to keep our warehouse clubs stocked with merchandise, similar natural disasters could adversely impact our overall sales, costs and profit performance in the future.

Changes in tax laws, increases in the enacted tax rates, adverse outcomes in connection with tax audits in any jurisdiction, or any change in the pronouncements relating to accounting for income taxes could have a material adverse effect on our financial condition and results of operations. In one of the countries where we operate, the government made changes several years ago in the method of computing minimum tax payments, under which the government sought to require retailers to pay taxes based on a percentage of sales if the resulting tax were greater than the tax payable based on a percentage of income (Alternative Minimum Tax or "AMT"). We, together with our tax and legal advisers, appealed these interpretations and litigated our cases in the country’s court system. However, in the fourth quarter of fiscal year 2023, we recorded a $7.2 million charge to settle the AMT payment dispute in this country. Of this amount, $1.0 is related to the reserve for an income tax receivable for one of the tax years for which we sought a refund and the remaining $6.2 million is an accrual for the unpaid years of the dispute. As part of the settlement, we will pay AMT on a go-forward basis, including for fiscal year 2023 for which the amount accrued was $2.0 million. To address the inherent risk of operating in a country in which significant tax legislation changes can significantly impact our low margin business model and limitations on our ability to successfully appeal these burdensome taxes, we have increased prices in this market to offset or partially offset the rise in costs to comply with the annual AMT payment.

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Periodically, we experience a lack of availability of U.S. dollars in certain markets (U.S. dollar illiquidity). This can and has impeded our ability to convert local currencies obtained through merchandise sales into U.S. dollars to settle the U.S. dollar liabilities associated with our imported products and to otherwise redeploy these funds in our Company. This illiquidity also increases our foreign exchange exposure to any devaluation of the local currency relative to the U.S. dollar. For instance, during fiscal year 2021, we experienced significant limitations on our ability to convert Trinidad dollars to U.S. dollars or other tradable currencies. Our balance as of August 31, 2023 of Trinidad dollar denominated cash and cash equivalents and short and long-term investments measured in U.S. dollars was $18.2 million, a decrease of $82.3 million from the peak of $100.5 million as of November 30, 2020. However, as the Trinidad central bank strictly manages the exchange rate of the Trinidad dollar with the U.S. dollar and affects the level of U.S. Dollar liquidity in the market through its interventions, we are subject to continued challenges in converting our Trinidad dollars to U.S. dollars, as well as being exposed to the risk of a potential devaluation of the currency.

During the third quarter of fiscal year 2023, the Honduran Central Bank began limiting the availability and controlling the allocation of U.S. dollars for the conversion from Honduran lempiras to U.S. dollars. As of August 31, 2023, our Honduran subsidiary had approximately $19.6 million of cash and cash equivalents denominated in lempiras, which cannot be readily converted to U.S. dollars for general use within the Company.We are actively working with our banking partners and government authorities to address this situation.

We face difficulties in the shipment of, and the risks inherent in the importation of, merchandise to our warehouse clubs. One of those difficulties is possible governmental restrictions on the importation of merchandise. In late May 2023, disputes with Nicaraguan customs and tax authorities resulted in delays in the issuance of our importation clearance, and general delays in the customs inspection process. While this situation has occurred frequently in the last few years, we generally have been able to plan around these import blockages and resume within a manner of days. However, the most recent delay in obtaining importation clearance, resulted in us being unable to import merchandise into Nicaragua for several weeks in June. While at this time our tax clearances and imports seem to have returned to a more normal cadence, we continue to monitor this situation closely and are working with local officials to seek continuity of imports into Nicaragua as well as the other jurisdictions in which we operate.

Financial highlights for the fourth quarter of fiscal year 2023 included:

•Total revenues increased 9.5% over the comparable prior year period.

•Net merchandise sales increased 10.0% over the comparable prior year period. We ended the quarter with 51 warehouse clubs compared to 50 warehouse clubs at the end of the fourth quarter of fiscal year 2022. Net merchandise sales - constant currency increased 6.4% over the comparable prior year period.

•Comparable net merchandise sales (that is, sales in the 50 warehouse clubs that have been open for greater than 13 1⁄2 calendar months) for the 13 weeks ended September 3, 2023 increased 8.8%. Comparable net merchandise sales - constant currency for the 13 weeks ended September 3, 2023 increased 5.2%.

•Membership income for the fourth quarter of fiscal year 2023 increased 10.6% to $17.2 million over the comparable prior year period.

•Total gross margins (net merchandise sales less associated cost of goods sold) increased 10.6% over the prior-year period, and merchandise gross profits as a percent of net merchandise sales were 15.6%, an increase of 10 basis points or 0.1% from the same period in the prior year.

•Selling, general and administrative expenses increased $25.2 million or 18.8% compared to the fourth quarter of fiscal year 2022, primarily due to $9.2 million of costs associated with the reserve for the AMT settlement and $5.7 million of asset impairment and closure costs as well as higher compensation, depreciation, and professional fees.

•Operating income for the fourth quarter of fiscal year 2023 was $32.1 million, a decrease of 17.5%, or $6.9 million, compared to the fourth quarter of fiscal year 2022, primarily due to costs associated with the reserve for the AMT settlement and asset impairment and closure costs.

•We recorded a $1.5 million net loss in total other expense, net in the fourth quarter of fiscal year 2023 compared to a $3.5 million net loss in total other expense, net in the same period last year primarily due to an increase in interest income of $3.0 million, comparatively, because of significantly more investments of surplus cash at higher yields, and partially offset by an increase in other expense of $1.0 million, primarily due to an increase in total foreign currency transaction losses.

•Our effective tax rate increased in the fourth quarter of fiscal year 2023 to 49.9% from 34.2% in the fourth quarter of fiscal year 2022. The increase in the effective rate versus the prior year was primarily attributable to the comparably unfavorable impact of 11.6% due to the AMT settlement and 5.4% unfavorable impact from asset impairment and related closure costs.

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•Net income attributable to PriceSmart for the fourth quarter of fiscal year 2023 was $15.4 million, or $0.49 per diluted share, inclusive of a negative impact of $0.30 per diluted share for costs related to the reserve for the AMT settlement and $0.18 per diluted share of asset impairment and closure costs, compared to $23.3 million, or $0.75 per diluted share, in the fourth quarter of fiscal year 2022.

•Adjusted net income attributable to PriceSmart for the fourth quarter of fiscal year 2023 was $20.4 million, or an adjusted $0.65 per diluted share, inclusive of a negative impact of $0.30 per diluted share for costs related to the reserve for the AMT settlement, compared to adjusted net income of $23.3 million, or $0.75 per diluted share, in the comparable prior year period.

•Adjusted EBITDA for the fourth quarter of fiscal year 2023 was $57.2 million compared to $56.6 million in the same period last year.

Financial highlights for fiscal year 2023 included:

•Total revenues increased 8.5% over the comparable prior year period.

•Net merchandise sales increased 9.0% over the comparable prior year period. We ended the year with 51 warehouse clubs compared to 50 warehouse clubs at the end of fiscal year 2022. Net merchandise sales - constant currency increased 8.3% over the comparable prior year period.

•Comparable net merchandise sales (that is, sales in the 50 warehouse clubs that have been open for greater than 13 1⁄2 calendar months) for the 52 weeks ended September 3, 2023 increased 7.1%. Comparable net merchandise sales - constant currency for the 52 weeks ended September 3, 2023 increased 6.3%.

•Membership income increased 8.5% to $66.0 million.

•Total gross margins (net merchandise sales less associated cost of goods sold) increased 12.2% over the prior-year period, and merchandise gross profits as a percent of net merchandise sales were 15.8%, an increase of 50 basis points or 0.5% from the same period in the prior year.

•Selling, general and administrative expenses increased $60.7 million or 11.8% compared to fiscal year 2022. We incurred $7.7 million of CEO departure-related costs, $9.2 million of costs related to the reserve for the AMT settlement, and $5.7 million of asset impairment and closure costs in the current-year period.

•Operating income was $184.5 million, an increase of 10.4%, or $17.4 million, compared to fiscal year 2022, primarily due to costs associated with the reserve for the AMT settlement and asset impairment and closure costs.

•We recorded a $15.3 million net loss in total other expense, net in fiscal year 2023 compared to a $10.6 million net loss in total other expense, net in the same period last year primarily due to an increase of $10.9 million of other expense, which is primarily foreign currency transaction losses, partially offset by an increase of $7.7 million in interest income comparatively.

•The effective tax rate for fiscal year 2023 was 35.4% as compared to the effective tax rate for fiscal year 2022 of 33.2%. The increase is primarily driven by the comparably unfavorable impact of write-offs of VAT receivables, Aeropost write-offs and asset impairment and related closure costs of 2.2% and a 1.8% unfavorable impact due to the AMT settlement. This was partially offset by a greater portion of income falling into lower tax jurisdictions which resulted in a 2.0% favorable impact.

•Net income attributable to PriceSmart for fiscal year 2023 was $109.2 million, or $3.50 per diluted share, inclusive of a negative impact of $0.30 per diluted share for costs related to the reserve for the AMT settlement and $0.18 per diluted share of asset impairment and closure costs, compared to $104.5 million, or $3.38 per diluted share, in the comparable prior year period.

•Adjusted net income attributable to PriceSmart for fiscal year 2023 was $126.5 million, or an adjusted $4.06 per diluted share, inclusive of a negative impact of $0.30 per diluted share for costs related to the reserve for the AMT settlement, compared to adjusted net income of $103.1 million, or an adjusted $3.33 per diluted share, in the comparable prior year period.

•Adjusted EBITDA for fiscal year 2023 was $275.7 million compared to $234.9 million in the same period last year.

Non - GAAP (Generally Accepted Accounting Principles) Financial Measures

The accompanying Consolidated Financial Statements, including the related notes, are presented in accordance with U.S. GAAP (Generally Accepted Accounting Principles). In addition to relevant GAAP measures, we also provide non-GAAP measures including adjusted net income, adjusted net income per diluted share, adjusted EBITDA and net merchandise sales - constant currency because management believes these metrics are useful to investors and analysts by excluding items that we do not believe are indicative of our core operating performance. These measures are customary for our industry and commonly used by competitors. These non-GAAP financial measures should not be reviewed in isolation or considered as an alternative to any other performance measure derived in accordance with GAAP and may not be comparable to similarly titled measures used by other companies in our industry or across different industries.

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Adjusted Net Income and Adjusted Net Income per Diluted Share

The adjusted net income and adjusted net income per diluted share metrics are important measures used by management to compare the performance of core operating results between periods. We define adjusted net income as net income, as reported, adjusted for: separation costs associated with the departure of our former Chief Executive Officer, gain on the sale of our Aeropost subsidiary, the write-off of certain Aeropost receivables, the write-off of certain VAT receivables following unfavorable court rulings, asset impairment on our assets held for sale and closure costs, the gain on the acquisition of a building, and the tax impact of the foregoing adjustments on net income. We define adjusted net income per diluted share as adjusted net income divided by the weighted-average diluted shares outstanding.

We believe adjusted net income and adjusted net income per diluted share are useful metrics to investors and analysts because they present more accurate year-over-year comparisons for our net income and net income per diluted share because adjusted items are not the result of our normal operations.

Three Months Ended Years Ended

Adjustments:

Gain on sale of Aeropost subsidiary (2) — — — (2,736)

Aeropost-related write-offs (3) — — 2,786 —

VAT receivable write-off (4) — — 2,309 —

Asset impairment and closure costs (5) 5,658 — 5,658 —

Gain on acquisition of building (6) (948) — (948) —

Tax impact of adjustments to net income (7) 266 — (284) 1,280

Separation costs associated with Chief Executive Officer departure — — 0.23 —

Gain on sale of Aeropost subsidiary — — — (0.05)

Aeropost-related write-offs — — 0.09 —

VAT receivable write-off — — 0.08 —

Asset impairment and closure costs 0.18 — 0.18 —

Gain on acquisition of building (0.02) — (0.02) —

(1) Reflects $7.7 million of separation costs associated with the departure of our former Chief Executive Officer in February 2023.

(2) Reflects a gain of $2.7 million associated with the sale of our Aeropost subsidiary in October 2021.

(3) Reflects $2.1 million of Aeropost-related write-offs in the first quarter of fiscal year 2023 and $660,000 of a receivable written-off in connection with the settlement in the third quarter of fiscal year 2023 of a claim for indemnification from the buyer of the Aeropost business.

(4) Reflects $2.3 million of VAT receivables related to prior periods deemed not recoverable and written-off in the third quarter of fiscal year 2023 following unfavorable court rulings.

(5) Reflects $5.7 million of impairment charges primarily related to the write down of assets in connection with our decision in the fourth quarter of fiscal year 2023 to seek to sell our Trinidad sustainable packaging plant.

(6) Reflects a $950,000 gain related to a building we acquired upon the early termination of a lease in which we were the lessor of the land on which the building was constructed by and abandoned by one of our tenants.

(7) Reflects the tax effect of the above-mentioned adjustments.

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Adjusted EBITDA

Adjusted EBITDA is defined as net income before interest expense, net, provision for income taxes and depreciation and amortization, adjusted for the impact of certain other items, including interest income; other income (expense), net; separation costs associated with Chief Executive Officer departure; asset impairment and closure costs; Aeropost write-offs; the write-off of certain VAT receivables following unfavorable court rulings. The following is a reconciliation of our Net income to Adjusted EBITDA for the periods presented:

Three Months Ended Years Ended

Adjustments:

Aeropost-related write-offs (3) — — 2,786 —

VAT receivable write-off (4) — — 2,309 —

Asset impairment and closure costs (5) 5,658 — 5,658 —

(1) Primarily consists of foreign currency losses or gains due to the revaluation of monetary assets and liabilities (primarily U.S. dollars). This line item includes a gain of $950,000 associated with the acquisition of a building upon a lease termination in the fourth quarter of fiscal year 2023 and a gain of $2.7 million associated with the sale of our Aeropost subsidiary in October 2021.

(2) Reflects $7.7 million of separation costs associated with the departure of our former Chief Executive Officer in February 2023.

(3) Reflects $2.1 million of Aeropost-related write-offs in the first quarter of fiscal year 2023 and $660,000 of a receivable written-off in connection with the settlement in the third quarter of fiscal year 2023 of a claim for indemnification from the buyer of the Aeropost business.

(4) Reflects $2.3 million of VAT receivables related to prior periods deemed not recoverable and written-off in the third quarter of fiscal year 2023 following unfavorable court rulings.

(5) Reflects $5.7 million of impairment primarily related to the write down of assets in connection with our decision in the fourth quarter of fiscal year 2023 to seek to sell our Trinidad sustainable packaging plant.

Net Merchandise Sales - Constant Currency

As a multinational enterprise, we are exposed to changes in foreign currency exchange rates. The translation of the operations of our foreign-based entities from their local currencies into U.S. dollars is sensitive to changes in foreign currency exchange rates and can have a significant impact on our reported financial results. We believe that constant currency is a useful measure, indicating the actual growth of our operations. When we use the term "net merchandise sales - constant currency", it means that we have translated current year net merchandise sales at prior year monthly average exchanges rates. Net merchandise sales - constant currency results exclude the effects of foreign currency translation. Impact of foreign currency is the effect of currency fluctuations on our net merchandise sales. Refer to “Management’s Discussion & Analysis – Net Merchandise Sales” and Refer to “Management’s Discussion & Analysis – Comparable Net Merchandise Sales” for our quantitative analysis and discussion. Reconciliations between net merchandise sales - constant currency and comparable net merchandise sales - constant currency and the most directly comparable GAAP measure are included where applicable.

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Comparison of Fiscal Year 2023 to 2022

The following discussion and analysis compares the results of operations for the fiscal years ended August 31, 2023 and 2022 and should be read in conjunction with the consolidated financial statements and the accompanying notes included elsewhere in this report. For a comparison of the fiscal years ended August 31, 2022 and 2021, please see Part II. “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition” in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2022 filed with the SEC on October 31, 2022. Unless otherwise noted, all tables present U.S. dollar amounts in thousands. Certain percentages presented are calculated using actual results prior to rounding. Our operations consist of four reportable segments: Central America, the Caribbean, Colombia and the United States. The Company’s reportable segments are based on management’s organization of these locations into operating segments by general geographic location, which are used by management and the Company's chief operating decision maker in setting up management lines of responsibility, providing support services, and making operational decisions and assessments of financial performance. Segment amounts are presented after converting to U.S. dollars and consolidating eliminations. From time to time, we revise the measurement of each segment's operating income, including certain corporate overhead allocations, and other measures as determined by the information regularly reviewed by our chief operating decision maker. When we do so, the previous period amounts and balances are reclassified to conform to the current period's presentation.

Net Merchandise Sales

The following tables indicate the net merchandise sales in the reportable segments in which we operate and the percentage growth in net merchandise sales by segment during fiscal years 2023 and 2022:

Years Ended

Overall, net merchandise sales grew by 9.0% for fiscal year 2023 compared to fiscal year 2022, driven by a 3.6% increase in transactions and a 5.2% increase in average ticket. Transactions represent the total number of visits our Members make to our warehouse clubs resulting in a sale and the total number of PriceSmart.com curbside pickup and delivery service transactions. Average ticket represents the amount our Members spend on each visit or PriceSmart.com order. We had 51 clubs in operation as of August 31, 2023 compared to 50 clubs as of August 31, 2022.

Net merchandise sales in our Central America segment increased 12.1% during fiscal year 2023. This increase had a 720 basis point (7.2%) positive impact on total net merchandise sales growth. All markets within this segment had positive net merchandise sales growth for the twelve-month period ended August 31, 2023. We added one new club to the segment when compared to the comparable prior-year period. We opened our third warehouse club in El Salvador in May 2023.

Net merchandise sales in our Caribbean segment increased 9.8% during fiscal year 2023. This increase had a 280 basis point (2.8%) positive impact on total net merchandise sales growth. All of our markets in this segment had positive net merchandise sales growth.

Net merchandise sales in our Colombia segment decreased 8.3% during fiscal year 2023. This decrease had a 100 basis point (1.0%) negative impact on total net merchandise sales growth. The primary driver of the decreased sales for the year was due to the significant devaluation of the Colombian peso during the first three quarters of fiscal year 2023. During the fourth quarter of fiscal year 2023, the Colombian peso appreciated compared to the comparable prior year period and net merchandise sales grew 2.1% in the fourth quarter of fiscal year 2023 compared to the same period in the prior year.

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The following table indicates the impact that currency exchange rates had on our net merchandise sales in dollars and the percentage change from the twelve-month period ended August 31, 2023. When we use the term "net merchandise sales - constant currency", it means that we have translated current year net merchandise sales at prior year monthly average exchanges rates. Net merchandise sales - constant currency results exclude the effects of foreign currency translation. Impact of foreign currency is the effect of currency fluctuations on our net merchandise sales.

Overall, the effects of currency fluctuations within our markets had an approximately $27.6 million, or 70 basis point (0.7%), positive impact on net merchandise sales for the twelve-months ended August 31, 2023.

Currency fluctuations had a $85.0 million, or 360 basis point (3.6%), positive impact on net merchandise sales in our Central America segment for the twelve months ended August 31, 2023. These currency fluctuations contributed approximately 220 basis points (2.2%) of positive impact on total net merchandise sales for fiscal year 2023. The Costa Rica colón appreciated significantly against the dollar as compared to the same period a year ago, which was a significant contributing factor to the favorable currency fluctuations in this segment.

Currency fluctuations had a $5.2 million, or 50 basis point (0.5%), positive impact on net merchandise sales in our Caribbean segment for the twelve months ended August 31, 2023. These currency fluctuations contributed approximately 10 basis points (0.1%) of positive impact on total net merchandise sales growth for the current fiscal year period. The positive impact was primarily driven by the appreciation of the Dominican peso as compared to the same period last year.

Currency fluctuations had a $62.6 million, or 1,330 basis point (13.3%), negative impact on net merchandise sales in our Colombia segment for the twelve months ended August 31, 2023. These currency fluctuations contributed approximately 160 basis points (1.6%) of negative impact on total net merchandise sales for the current fiscal year period.

Net Merchandise Sales by Category

The following table indicates the approximate percentage of net sales accounted for by each major category of items sold during the fiscal years ended August 31, 2023 and 2022:

Years Ended August 31,

Foods & Sundries 50 % 49 %

Softlines 5 6

Other Business 5 5

Net Merchandise Sales 100 % 100 %

The mix of sales by major category changed slightly. Foods & Sundries increased approximately 1%, while Softlines decreased approximately 1% between fiscal year 2023 and 2022. Shifts in consumer preferences contributed to the changes in category mix.

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Comparable Merchandise Sales

We report comparable warehouse club sales on a “same week” basis with 13 weeks in each quarter beginning on a Monday and ending on a Sunday. The periods are established at the beginning of the fiscal year to provide as close a match as possible to the calendar month and quarter that is used for financial reporting purposes. This approach equalizes the number of weekend days and weekdays in each period for improved sales comparison, as we experience higher warehouse club sales on the weekends. Approximately every five years, the Company uses a 53-week year and a six-week “August” to account for the fact that 52 weeks is only 364 days. For fiscal year 2022, we used a 53-week year and a six-week “August.” However, for fiscal year 2023, we have 52 weeks as per the standard calendar year. Further, each of the warehouse clubs used in the calculations was open for at least 13 1⁄2 calendar months before its results for the current period were compared with its results for the prior period. As a result, sales related to one of our warehouse clubs opened during fiscal year 2023 will not be used in the calculation of comparable sales until they have been open for at least 13 1⁄2 months. Therefore, comparable net merchandise sales include 50 warehouse clubs for the fifty-two week period ended September 3, 2023.

The following tables indicate the comparable net merchandise sales in the reportable segments in which we operate and the percentage changes in net merchandise sales by segment during the fifty-two week period ended September 3, 2023, compared to the same fifty-two week period of the prior year and the fifty-three week period ended September 4, 2022 compared to the fifty-three week period of the prior year:

% Increase/(Decrease)in ComparableNet Merchandise Sales

Fifty-Two Weeks Ended Fifty-Three Weeks Ended

Consolidated comparable net merchandise sales 7.1 % 10.4 %

Comparable net merchandise sales for those warehouse clubs that were open for at least 13 1⁄2 months for some or all of the fifty-two week period ended September 3, 2023 increased 7.1%.

Comparable net merchandise sales in our Central America segment increased 10.9% for the fifty-two week period ended September 3, 2023. The positive comparable net merchandise sales growth for our Central America segment contributed approximately 650 basis points (6.5%) of positive impact in total comparable merchandise sales.

For the fifty-two weeks ended September 3, 2023, strong performance in our largest market, Costa Rica, contributed approximately 340 basis points (3.4%) of positive impact on total comparable net merchandise sales. During the year, Costa Rica experienced significant appreciation of the Costa Rica colón versus the comparable prior year period, which positively affected comparable net merchandise sales. The relatively smaller markets of Honduras, Guatemala, Nicaragua, and El Salvador, along with our second largest market, Panama, contributed approximately 310 basis points (3.1%) of positive impact on total comparable net merchandise sales.

Our Caribbean segment increased 5.9% for the fifty-two week period ended September 3, 2023. This increase contributed approximately 170 basis points (1.7%) of positive impact in total comparable net merchandise sales. Our Dominican Republic market continued its strong performance in the fifty-two week period, with 12.4% comparable net merchandise sales growth.

Comparable net merchandise sales in our Colombia segment decreased 9.2% for the fifty-two week period ended September 3, 2023. This decrease contributed approximately 110 basis points (1.1%) of negative impact to the increase in total comparable net merchandise sales. The year-to-date decrease is primarily due to the foreign currency devaluation.

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When we use the term "comparable net merchandise sales - constant currency", it means that we have translated current year comparable net merchandise sales at prior year monthly average exchanges rates. Comparable net merchandise sales - constant currency results exclude the effects of foreign currency translation. Impact of foreign currency is the effect of currency fluctuations on our comparable net merchandise sales. The following tables illustrate the comparable net merchandise sales - constant currency percentage growth and the impact that changes in foreign currency exchange rates had on our comparable merchandise sales percentage growth for the fifty-two week period ended September 3, 2023:

Fifty-Two Weeks Ended September 3, 2023

Consolidated comparable net merchandise sales 7.1 % 6.3 % 0.8 %

Overall, the mix of currency fluctuations within our markets had an 80 basis point (0.8%) positive impact on comparable net merchandise sales for the fifty-two week period ended September 3, 2023.

Currency fluctuations within our Central America segment accounted for approximately 240 basis points (2.4%) of the positive impact on total comparable net merchandise sales for the fifty-two week period ended September 3, 2023. Our Costa Rica market was the main contributor as the market experienced currency appreciation when compared to the same periods last year.

Currency fluctuations within our Caribbean segment accounted for approximately 10 basis points (0.1%) of positive impact on total comparable net merchandise sales for the fifty-two week period ended September 3, 2023. Our Dominican Republic market experienced currency appreciation when compared to the same period last year.

Currency fluctuations within our Colombia segment accounted for approximately 170 basis points (1.7%) of negative impact on total comparable net merchandise sales for the fifty-two week period ended September 3, 2023. This reflects the devaluation of the Colombia peso throughout fiscal year 2023 when compared to the same period a year ago.

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Membership Income

Membership income is recognized ratably over the one-year life of the membership.

Years Ended

The number of Member accounts at the end of fiscal year 2023 was 2.5% higher than the prior year period. Membership income increased 8.5% compared to the comparable prior-year period.

Membership income increased in our Central America, Caribbean, and Colombia segments in the twelve months ended August 31, 2023. The consolidated increase in membership income is primarily due to an increase in the membership base since the comparable prior year period. Since August 31, 2022, our Central America and Caribbean segments have increased their membership base while our Colombia segment has faced a decline in its membership base. Inflation and significant foreign currency devaluation have adversely impacted our Members in that market. Despite the decline in membership base, our Colombia segment saw an increase in membership income due to an increase in the membership fees charged to Members.

We offer the Platinum Membership program in all locations where PriceSmart operates. The annual fee for a Platinum Membership in most markets is approximately $75. The Platinum Membership program provides Members with a 2% rebate on most items, up to an annual maximum of $500. We record the 2% rebate as a reduction on net merchandise sales at the time of the sales transaction. Platinum Membership accounts are 8.9% of our total membership base as of August 31, 2023, an increase from 7.4% as of August 31, 2022. Platinum Members tend to have higher renewal rates than our Diamond Members. For fiscal year 2023, our auto-renewal process accounted for approximately 6.9% of our total membership renewals.

Our trailing twelve-month renewal rate was 86.9% and 88.9% for the periods ended August 31, 2023 and August 31, 2022, respectively.

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Other Revenue

Other revenue primarily consists of non-merchandise revenue from freight and handling fees generated from the marketplace and casillero operations we sold in October 2021, our interest-generating portfolio from our co-branded credit cards, and rental income from operating leases where the Company is the lessor.

Years Ended

Amount Increase/ (Decrease) from prior year % Change Amount

Comparison of 2023 to 2022

The primary driver of the decrease in other revenue for the year ended August 31, 2023 was the sale of our Aeropost subsidiary and its marketplace and casillero operations on October 1, 2021. This was partially offset by an increase in Miscellaneous revenue due to an increase in incentive fee revenue on our co-branded credit cards. For additional information on the results of the disposition, refer to “Index to Consolidated Financial Statements: Notes to Consolidated Financial Statements, Note 2 – Summary of Significant Accounting Policies.”

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Results of Operations

Years Ended

Results of Operations Consolidated August 31, 2023 August 31, 2022

(Amounts in thousands, except percentages and number of warehouse clubs)

Net merchandise sales

Total gross margin percentage 15.8% 15.3%

Revenues

Percentage change from comparable period 8.5% 12.3%

Comparable net merchandise sales

Total comparable net merchandise sales increase 7.1% 10.4%

Total revenue margin

Total revenue margin percentage 17.2% 16.8%

Selling, general and administrative

Selling, general and administrative percentage of total revenues 13.0% 12.6%

Operational data

Warehouse clubs at period end 51 50

Warehouse club sales floor square feet at period end 2,524 2,484

(1)See Part II. “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non - GAAP Financial Measures” for the definition of Adjusted EBITDA and a reconciliation to GAAP net income attributable to PriceSmart as reported.

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Years Ended

Operating income- by segment

(1)The reconciling items reflect the amount eliminated upon consolidation of intersegment transactions.

The following table summarizes the selling, general and administrative expense for the periods disclosed:

Years Ended

August 31, 2023 % ofTotal Revenue August 31, 2022 % ofTotal Revenue

Selling, general and administrative detail:

Reserve for AMT settlement 7,179 0.2 — —

Separation costs associated with Chief Executive Officer departure 7,747 0.2 — —

Asset impairment and closure costs 5,658 0.1 — —

Loss on disposal of assets 744 — 1,265 —

Total gross margin is derived from our Revenue – Net merchandise sales less our Cost of goods sold – Net merchandise sales and represents our sales and cost of sales generated from the business activities of our warehouse clubs. We express our Total gross margin percentage as a percentage of our Net merchandise sales.

On a consolidated basis, total gross margin as a percent of net merchandise sales for the twelve months ended August 31, 2023 was 15.8%, 50 basis points (0.5%) higher than the comparable prior year period, respectively. Approximately 30 basis points (0.3%) of this increase was due to lower markdowns when compared to the comparable prior year period. We took significant markdowns in the third quarter of fiscal year 2022 when we had excessive amounts of slow-moving inventory because of changing consumer preferences as Members began to resume buying patterns similar to our pre-pandemic sales mix. In addition, supply chain disruptions and shipping delays in the prior-year period led to our having excess out-of-season merchandise that we chose to liquidate to free up sales floor space for the holiday season last year. Our food service and bakery margins increased in fiscal year 2023 compared to the prior year period contributing another 30 basis points (0.3%) to the increase and our freight and handling costs decreased during fiscal year 2023 which contributed an additional 10 basis points (0.1%) to the increase. This was partially offset by our elimination of a COVID premium we included in the price of merchandise we sold and services we provided, contributing negative 20 basis points (0.2%) to the increase.

Total revenue margin is derived from Total revenues, which includes our Net merchandise sales, Membership income, Export sales, and Other revenue and income less our Cost of goods sold for net merchandise sales, Export sales, and Non-merchandise revenues. We express our Total revenue margin as a percentage of Total revenues.

Total revenue margin increased 40 basis points (0.4%) for the twelve months ended August 31, 2023 compared to the prior-year period, which is primarily the result of higher total gross margin as a percent of net merchandise sales of 50 basis points (0.5%).

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Selling, general, and administrative expenses consist of warehouse club and other operations, general and administrative expenses, separation costs associated with the Chief Executive Officer departure, pre-opening expenses, asset impairment and closure costs, reserve for settlement of AMT, and loss (gain) on disposal of assets. In total, Selling, general and administrative expenses increased $60.7 million compared to the prior year and increased 40 basis points (0.4%) to 13.0% of total revenue for fiscal year 2023 compared to 12.6% of total revenues for fiscal year 2022 offset, in part, by our Interim Chief Executive Officer's election not to receive compensation.

Warehouse club and other operations expenses increased to 9.4% of total revenues for fiscal year 2023 compared to 9.3% for fiscal year 2022, primarily due to our Costa Rica market which increased 20 basis points (0.2%) as a percentage of revenue year over year due to the appreciation of the Costa Rica colón, and partially offset by our Colombia market which decreased 10 basis points (0.1%) as a percentage of revenue year over year due to the devaluation of the Colombian peso.

General and administrative expenses decreased to 3.1% of total revenues for the current year compared to 3.3% for the prior fiscal year. The 20 basis point (0.2%) decrease is primarily due to leveraging of general and administrative expenses while revenues increased in fiscal year 2023 compared to the prior year.

In the second quarter of fiscal year 2023, we recorded $7.7 million for separation and other related termination benefits for our former Chief Executive Officer who resigned effective February 3, 2023. Of this amount $4.2 million in net charges related to adjustments to non-cash stock-based compensation. We substantially fulfilled all payment obligations by the end of the second quarter of fiscal year 2023; however, some vesting of performance stock units will occur in the first quarter of fiscal year 2024. On a go-forward basis, our Interim Chief Executive Officer has declined to receive compensation for his services during his term; therefore, we expect Selling, general and administrative expenses will be positively impacted by $2.5 million of savings each quarter during his term, reduced by salary increases for other executives related to the change in leadership.

In the fourth quarter of fiscal year 2023, we recorded $5.7 million of asset impairment and closure costs primarily related to the write down of the assets held for sale of our Trinidad sustainable packaging plant to their estimated fair value upon our decision to seek to sell the plant. We planned to use the plant to increase efficiencies by eliminating intermediaries in packaging and labeling and manufacturing some of our packaging materials using compostable or recyclable inputs. However, we found that achieving economic feasibility for this business proved challenging. Therefore, we decided to refocus our efforts on our core competencies as a retailer and redeploy assets we could use in our club business and seek a buyer for the remainder.

Additionally, in the fourth quarter of fiscal year 2023, we recorded a $7.2 million charge to settle litigation regarding several AMT cases in one of our markets where the application of complex tax laws are subject to interpretation. In that country, we had challenged AMT rules requiring us to pay taxes based on a percentage of sales if the percentage of sales method resulted in a higher amount of tax payable than the amount payable based on taxable income at the statutory rate. Of this amount, $1.0 million relates to our write-off of an income tax receivable we had recorded with respect to taxes we previously paid on the percentage of sales basis in one tax year and for which we had sought a refund that we now no longer expect to receive. We will make a payment of $6.2 million to resolve amounts due for tax years in which we made tax payments using the original computation based on taxable income rather than the percentage of sales method. As part of the settlement, going forward we will pay the higher of the minimum tax or the amount based on taxable income at the statutory rate. As a result, we have accrued an additional $2.0 million of AMT for fiscal year 2023. For the three and twelve-months ended August 31, 2023, net income attributable to PriceSmart was negatively impacted by $9.2 million in total and diluted earnings per share was negatively impacted by $0.30.

Operating income in fiscal year 2023 increased to $184.5 million (4.2% of total revenue) compared to $167.1 million (4.1% of total revenue) for the same period last year. Operating income was impacted negatively by $9.2 million (0.2% of total revenue) for costs related to the reserve for the AMT settlement and $5.7 million (0.1% of total revenue) of asset impairment and closure costs.

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Interest Income

Net interest income represents the earnings generated from interest-bearing assets held by PriceSmart, Inc. and our wholly owned foreign subsidiaries. These assets include investments in fixed income securities and deposits held with financial institutions. The interest income is derived from the interest payments received on these assets, which serve to enhance our overall financial returns.

Years Ended

Amount Change Amount

Net interest income increased for the twelve-month period ended August 31, 2023 primarily due to an increase in investments at higher yields when compared to the comparable prior year period.

Interest Expense

Years Ended

Amount Change Amount

Interest expense related to hedging activity 1,205 (2,029) 3,234

Net interest expense reflects borrowings by PriceSmart, Inc. and our wholly owned foreign subsidiaries to finance new land acquisition and construction for new warehouse clubs and distribution centers, warehouse club expansions, the capital requirements of warehouse club and other operations, and ongoing working capital requirements.

Net interest expense increased for the twelve-month period ended August 31, 2023, primarily due to higher interest rates on short-term borrowings and higher long-term borrowings outstanding when compared to the comparable prior year period. In addition, the Company had less interest expense related to hedging activity because of fewer outstanding swaps for the twelve-month period ended August 31, 2023.

Other Expense, net

Other expense, net consists of currency gains or losses, as well as net benefit costs related to our defined benefit plans and other items considered to be non-operating in nature.

Years Ended

Amount Change Amount

Monetary assets and liabilities denominated in currencies other than the functional currency of the respective entity (primarily U.S. dollars) are revalued to the functional currency using the exchange rate on the balance sheet date. These foreign exchange transaction gains/(losses) are recorded as currency gains or losses. Additionally, gains or losses from transactions denominated in currencies other than the functional currency of the respective entity also generate currency gains or losses.

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For the twelve-months ended August 31, 2023 the primary driver of Other expense, net included $8.5 million of losses due to revaluation of monetary assets and liabilities (primarily U.S. dollars) in several of our markets. Of those amounts, Costa Rica contributed a $3.5 million revaluation loss, due to the impact of the appreciation of the Costa Rican Colón on our U.S. dollar monetary net assets in Costa Rica. In addition, we incurred transaction costs in some of our countries with liquidity issues of $7.6 million during the twelve months ended August 31, 2023, associated with increased spreads and converting the local currencies into available tradable currencies before converting them to U.S. dollars.

Provision for Income Taxes

The tables below summarize the effective tax rate for the periods reported:

Years Ended

Amount Change Amount

Effective tax rate 35.4 % 33.2 %

For fiscal year 2023, the effective tax rate was 35.4% compared to 33.2% for fiscal year 2022. The increase is primarily driven by the comparably unfavorable impact of write-offs of VAT receivables, Aeropost write-offs and asset impairment and related closure costs of 2.2% and a 1.8% unfavorable impact due to the AMT settlement. This was partially offset by a greater portion of income falling into lower tax jurisdictions which resulted in a 2.0% favorable impact.

Other Comprehensive Income (Loss)

Other comprehensive loss for fiscal years 2023 and 2022 resulted primarily from foreign currency translation adjustments related to the assets and liabilities and the translation of the statements of income related to revenue, costs and expenses of our subsidiaries whose functional currency is not the U.S. dollar. When the functional currency in our international subsidiaries is the local currency and not U.S. dollars, the assets and liabilities of such subsidiaries are translated to U.S. dollars at the exchange rate on the balance sheet date, and revenue, costs and expenses are translated at average rates of exchange in effect during the period. The corresponding translation gains and losses are recorded as a component of accumulated other comprehensive income or loss. These adjustments will not affect net income until the sale or liquidation of the underlying investment. The reported other comprehensive income or loss reflects the unrealized increase or decrease in the value in U.S. dollars of the net assets of the subsidiaries as of the date of the balance sheet, which will vary from period to period as exchange rates fluctuate.

Years Ended

Amount Change From Prior Year % Change Amount

Other comprehensive income for fiscal year 2023 of approximately $31.6 million was primarily the result of the comprehensive gain of $33.7 million from foreign currency translation adjustments along with approximately $1.7 million related to unrealized losses on changes in the fair value of accrued pension obligations and $0.5 million related to unrealized losses on changes in the fair value of our derivative obligations. During fiscal year 2023, the largest translation adjustments were related to the appreciation of the local currency against the U.S. dollar of our Costa Rica and Colombia subsidiaries, partially offset by the devaluation of the local currencies against the U.S. dollar for our Dominican Republic subsidiary.

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LIQUIDITY AND CAPITAL RESOURCES

Financial Position and Cash Flow

Our operations have historically supplied us with a significant source of liquidity. We generate cash from operations primarily through net merchandise sales and membership fees. Cash used in operations generally consist of payments to our merchandise vendors, warehouse club and distribution center operating costs (including payroll, employee benefits and utilities), as well as payments for income taxes. Our cash flows provided by operating activities, supplemented with our long-term debt and short-term borrowings, have generally been sufficient to fund our operations while allowing us to invest in activities that support the long-term growth of our operations. We also have returned cash to stockholders through a semiannual dividend and by repurchasing shares of our common stock pursuant to the stock repurchase program we commenced in the fourth quarter of fiscal year 2023 and completed in the first quarter of fiscal year 2024. We evaluate our funding requirements on a regular basis to cover any shortfall in our ability to generate sufficient cash from operations to meet our capital requirements. We may consider funding alternatives to provide additional liquidity if necessary. Refer to Part II. “Item 8. Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements, Note 11 - Debt” for additional information regarding amounts outstanding on our short-term facilities and our long-term borrowings, and any repayments.

Repatriation of cash and cash equivalents held by foreign subsidiaries may require us to accrue and pay taxes for certain jurisdictions. If we decide to repatriate cash through the payment of cash dividends by our foreign subsidiaries to our domestic operations, we will accrue taxes if and when appropriate.

The following table summarizes the cash and cash equivalents, including restricted cash, held by our foreign subsidiaries and domestically (in thousands):

Total cash and cash equivalents, including restricted cash $ 252,202 $ 251,373

The following table summarizes the short-term investments held by our foreign subsidiaries and domestically (in thousands):

Amounts held by foreign subsidiaries $ 74,294 $ 11,160

Amounts held domestically 16,787 —

As of August 31, 2023 and August 31, 2022, there were no certificates of deposit with a maturity of over a year held by our foreign subsidiaries or domestically.

From time to time, we have experienced a lack of availability of U.S. dollars in certain markets (U.S. dollar illiquidity). This impedes our ability to convert local currencies obtained through merchandise sales into U.S. dollars to settle the U.S. dollar liabilities associated with our imported products or otherwise fund our operations. Since fiscal year 2017, we have experienced this situation in Trinidad and have been unable to source a sufficient level of tradable currencies. We are working with our banks in Trinidad and government officials to convert all of our Trinidad dollars into tradable currencies. During the third quarter of fiscal year 2023, the Honduran Central Bank began limiting the availability and controlling the allocation of U.S. dollars for the conversion from Honduran lempiras to U.S. dollars.We are actively working with our banking partners and government authorities to address this situation. We have and continue to take additional actions in this respect. Refer to “Management’s Discussion & Analysis – Factors Affecting Our Business” for our quantitative analysis and discussion.

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Our cash flows are summarized as follows (in thousands):

Years Ended

Net increase (decrease) in cash, cash equivalents $ 829 $ 35,894 $ (35,065)

Net cash provided by operating activities totaled $257.3 million and $121.8 million for the twelve months ended August 31, 2023 and 2022, respectively. The increase in net cash provided by operating activities is primarily the result of a net positive change in working capital generated from changes in our merchandise inventory and accounts payable positions, which contributed $84.9 million, and net a positive change in our other various operating assets and liabilities. Specifically, changes in our various operating assets and liabilities resulted in $17.6 million cash provided for fiscal year 2023 compared to $13.8 million use of cash in the same accounts for fiscal year 2022.

Net cash used in investing activities totaled $222.1 million and $74.8 million, respectively, for the years ended August 31, 2023 and August 31, 2022. The increase is primarily the result of an increase in purchases of certificates of deposits compared to the same twelve-month period a year-ago. Additionally, the increase included higher property and equipment expenditures compared to the same twelve-month period a year-ago to support growth of our real estate footprint.

Net cash used in financing activities totaled $41.1 million and $12.2 million for the twelve months ended August 31, 2023 and 2022, respectively. We use cash flows provided by financing primarily to fund our working capital needs, our warehouse club and distribution center acquisitions and expansions, and investments in technology to support our omni-channel initiatives. The $28.8 million increase in cash used in financing activities is primarily the result of a net decrease of proceeds from short-term borrowings compared to the same period a year-ago.

The following table summarizes the dividends declared and paid during fiscal years 2023, 2022 and 2021 (amounts are per share):

First Payment Second Payment

Declared Amount RecordDate DatePaid Amount RecordDate DatePaid Amount

Short-Term Borrowings and Long-Term Debt

Our financing strategy is to ensure liquidity and access to capital markets while minimizing our borrowing costs. The proceeds of these borrowings were or will be used for general corporate purposes, which may include, among other things, funding for working capital, capital expenditures, acquisitions, and repayment of existing debt. Refer to Part II. “Item 8. Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements, Note 11 - Debt.” for further discussion.

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Future Lease Commitments

We place a strong emphasis on managing future lease commitments related to various facilities and equipment that support our operations. We believe our current liquidity and cash flow projections can cover future lease commitments. As of August 31, 2023, we have signed one lease agreement which has not yet commenced. Refer to Part II. "Item 8. Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements, Note 9 - Commitments and Contingencies" for further discussion.

Repurchase of Common Stock and Reissuance of Treasury Shares Related to Employee Stock Awards

At the vesting dates for restricted stock awards to our employees, we repurchase a portion of the shares that have vested at the prior day's closing price per share and apply the proceeds to pay the employees' minimum statutory tax withholding requirements related to the vesting of restricted stock awards. The Company expects this practice going forward.

Shares of common stock repurchased by us are recorded at cost as treasury stock and result in the reduction of stockholders’ equity in our consolidated balance sheets. We may reissue these treasury shares.

The following table summarizes the equity securities repurchased as part of the Company's stock-based compensation programs during fiscal years 2023, 2022 and 2021:

Years Ended

Cost of repurchase of shares (in thousands) $ 7,245 $ 6,259 $ 5,542

We reissued 6,333 treasury shares as part of our stock-based compensation programs during fiscal year 2023, 8,300 treasury shares during fiscal year 2022 and 96,400 treasury shares during fiscal year 2021.

Share Repurchase Program

In July 2023 we announced a program authorized by our Board of Directors to repurchase up to $75 million of our common stock. Subsequent to our fiscal year that ended on August 31, 2023, we successfully completed the share repurchase program.We purchased a total of approximately 1,007,000 shares of our common stock under the program. The repurchases were made on the open market pursuant to a trading plan established pursuant to Rule 10(b)5-1 under the Securities Exchange Act of 1934, as amended, which permits common stock to be repurchased at a time that we might otherwise be precluded from doing so under insider trading laws or self-imposed trading restrictions. We do not expect to continue repurchases or adopt a new repurchase plan at this time.However, the Board of Directors could choose to commence another program in the future at its discretion after its review of the Company’s financial performance and anticipated capital requirements.

Share repurchase activity under the Company’s repurchase programs for the periods indicated was as follows (total cost in thousands):

Years Ended

Number of common shares acquired 71,530 —

Average price per common share acquired $ 78.54 $ —

Total cost of common share acquired $ 5,618 $ —

For further information, refer to Part II. “Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.”

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Critical Accounting Estimates

Our financial statements are prepared in accordance with GAAP in the United States. The preparation of our consolidated financial statements requires that management make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Some of our accounting policies require management to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain.

We evaluate our accounting policies and significant estimates on an ongoing basis, including those related to contingencies and litigation, income taxes, value added taxes, and long-lived assets. We base our estimates on historical experience and on other assumptions that management believes to be reasonable under the present circumstances. Using different estimates could have a material impact on our financial condition and results of operations.

We believe that the accounting policies described below involve a significant degree of judgment and complexity. Accordingly, we believe these are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations. For further information, refer to Part II. “Item 8. Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements, Note 2 - Summary of Significant Accounting Policies.”

Income Taxes

We account for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carry-forwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized.

As of August 31, 2023, we evaluated our deferred tax assets and liabilities and determined that a valuation allowance was necessary for certain deferred tax asset balances, primarily because of the existence of significant negative objective evidence, such as the fact that certain subsidiaries are in a cumulative loss position for the past three years, indicating that certain net operating loss carry-forward periods are not sufficient to realize the related deferred tax assets. We also specifically considered whether foreign tax credit balances could be utilized in the foreseeable future in light of current and future U.S. tax liabilities. We have historically applied foreign tax credits, generated from taxes withheld on certain payments PriceSmart receives from our foreign subsidiaries, to reduce U.S. income tax liabilities. However, as an incidental result of U.S. tax reform, following the reduction of the U.S. corporate income tax rate from 35% to 21%, we expect foreign tax credits generated to exceed U.S. income tax liability for the foreseeable future. Therefore, for the twelve-month period ended August 31, 2023 and August 31, 2022, we have recorded valuation allowances of $12.6 million and $11.8 million against our foreign tax credits, respectively.

We are required to file federal and state income tax returns in the United States and various other tax returns in foreign jurisdictions. The preparation of these tax returns requires us to interpret the applicable tax laws and regulations in effect in such jurisdictions, which could affect the amount of tax paid by us. We, in consultation with our tax advisors, base our tax returns on interpretations that we believe to be reasonable under the circumstances. The tax returns, however, are subject to routine reviews by the various taxing authorities in the jurisdictions in which we file our tax returns. As part of these reviews, a taxing authority may disagree with respect to the interpretations we used to calculate our tax liability and therefore require us to pay additional taxes.

We accrue an amount for our estimate of probable additional income tax liability. In certain cases, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant tax authority. An uncertain income tax position will not be recognized if it has 50% or less likelihood of being sustained. This requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. When facts and circumstances change, we reassess these probabilities and record any changes in the consolidated financial statements as appropriate. There were no material changes in our uncertain income tax positions for the period ended on August 31, 2023.

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Tax Receivables

We pay Value Added Tax (“VAT”) or similar taxes, income taxes, and other taxes within the normal course of our business in most of the countries in which we operate related to the procurement of merchandise and/or services we acquire and/or on sales and taxable income. VAT is a form of indirect tax applied to the value added at each stage of production (primary, manufacturing, wholesale and retail). This tax is similar to, but operates somewhat differently than, sales tax paid in the United States. We generally collect VAT from our Members upon sale of goods and services and pay VAT to our vendors upon purchase of goods and services. Periodically, we submit VAT reports to governmental agencies and reconcile the VAT paid and VAT received. The net overpaid VAT may be refunded or applied to subsequent returns, and the net underpaid VAT must be remitted to the government.

With respect to income taxes paid, if the estimated income taxes paid or withheld exceed the actual income tax due this creates an income tax receivable. In most countries where we operate, the governments have implemented additional collection procedures, such as requiring credit card processors to remit a portion of sales processed via credit and debit cards directly to the government as advance payments of VAT and/or income tax. This collection mechanism generally leaves us with net VAT and/or income tax receivables, forcing us to process significant refund claims on a recurring basis. These refund or offset processes can take anywhere from several months to several years to complete.

In two countries where the Company operates, minimum income tax rules require the Company to pay taxes based on a percentage of sales if the resulting tax were greater than the tax payable based on a percentage of income (AMT). As a result, the Company is making AMT payments substantially in excess of those it would expect to pay based on taxable income. The Company had income tax receivables of $10.7 million and $11.0 million as of August 31, 2023 and August 31, 2022, respectively, and deferred tax assets of $3.7 million and $3.5 million as of August 31, 2023 and August 31, 2022, respectively, in these countries.

In the fourth quarter of fiscal year 2023, we recorded a $7.2 million charge to settle the AMT payment dispute in one of the aforementioned countries. Of this amount, $1.0 million is a reserve we recorded against an income tax receivable for one of the tax years for which we sought a refund and the remaining $6.2 million is an accrual for the unpaid years of the dispute in which we made tax payments using the original computation based on taxable income.

While the rules related to refunds of income tax receivables in these countries are either unclear or complex, the Company has not placed any type of allowance on the recoverability of the remaining tax receivables, deferred tax assets or amounts that may be deemed under-paid, because the Company believes that it is more likely than not that it will ultimately succeed in its refund requests and appeals of these rules.

In one of the countries with a significant VAT receivable balance, the Company received unfavorable rulings at the supreme court level of that country denying a portion of the Company’s appeals for refund of over-withholdings of VAT. After evaluating the merits of the Company’s arguments, the court’s decision, and probability that the other related refund appeals would receive the same judgment, the Company concluded that a total of $2.3 million of related VAT receivable would not be recoverable and this amount was written-off in the third quarter of fiscal year 2023. These charges were recorded in the Warehouse club and other expenses line item under the Selling, general and administrative caption within the consolidated statements of income.

The Company's various outstanding VAT receivables and/or income tax receivables are based on cases or appeals with their own set of facts and circumstances. The Company consults and evaluates with legal and tax advisors regularly to understand the strength of its legal arguments and probability of successful outcomes in addition to its own experience handling complex tax issues. Based on those evaluations, the Company has not placed any type of allowance on the recoverability of the remaining tax receivables or deferred tax assets, because the Company believes that it is more likely than not that it will ultimately succeed in its refund requests.

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Our policy for classification and presentation of VAT receivables, income tax receivables and other tax receivables is as follows:

•Short-term VAT and Income tax receivables, recorded as Prepaid expenses and other current assets: This classification is used for any countries where our subsidiary has generally demonstrated the ability to recover the VAT or income tax receivable within one year. We also classify as short-term any approved refunds or credit notes to the extent that we expect to receive the refund or use the credit notes within one year.

•Long-term VAT and Income tax receivables, recorded as Other non-current assets: This classification is used for amounts not approved for refund or credit in countries where our subsidiary has not demonstrated the ability to obtain refunds within one year and/or for amounts which are subject to outstanding disputes. An allowance is provided against VAT and income tax receivable balances in dispute when we do not expect to eventually prevail in our recovery of such balances. We do not currently have any allowances provided against VAT and income tax receivables.

Long-lived Assets

We periodically evaluate our long-lived assets for indicators of impairment. Indicators that an asset may be impaired are:

•the asset's inability to continue to generate income from operations and positive cash flow in future periods;

•loss of legal ownership or title to the asset;

•significant changes in its strategic business objectives and utilization of the asset(s); and

•the impact of significant negative industry or economic trends.

Management's judgments are based on market and operational conditions at the time of the evaluation and can include management's best estimate of future business activity, which in turn drives estimates of future cash flows from these assets. These periodic evaluations could cause management to conclude that impairment factors exist, requiring an adjustment of these assets to their then-current fair market value. Future business conditions and/or activity could differ materially from the projections made by management causing the need for additional impairment charges. During fiscal year 2023, we recorded asset impairment and closure cost charges of $5.7 million primarily related to our Trinidad sustainable packaging plant to mark our available-for-sale assets down to their fair market value because we decided to discontinue its operations. We did not record any other impairment charges during fiscal year 2023 related to the loss of legal ownership or title to assets; significant changes in the Company's strategic business objectives or utilization of assets; or the impact of significant negative industry or economic trends. Loss on disposal of assets recorded during the years reported resulted from improvements to operations and normal preventive maintenance.

Seasonality and Quarterly Fluctuations

Historically, our merchandising businesses have experienced holiday retail seasonality in their markets. In addition to seasonal fluctuations, our operating results fluctuate quarter-to-quarter as a result of economic and political events in markets that we serve, the timing of holidays, weather, the timing of shipments, product mix, and currency effects on the cost of U.S.-sourced products which may make these products more or less expensive in local currencies and therefore more or less affordable. Because of such fluctuations, the results of operations of any quarter are not indicative of the results that may be achieved for a full fiscal year or any future quarter. In addition, there can be no assurance that our future results will be consistent with past results or the projections of securities analysts.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk from changes in interest rates, foreign currency exchange rates and commodity price risk. These market risks arise in the normal course of business. We do not engage in speculative trading activities. To manage the risk arising from these exposures, we utilize interest rate swaps, cross-currency interest rate swaps, non-deliverable foreign currency forward contracts and loans denominated in foreign currencies.

Information about the change in the fair value of our hedges and the financial impact thereof for the twelve-month period ended August 31, 2023 is disclosed in Part II. “Item 8. Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements, Note 13 - Derivative Instruments and Hedging Activities.”

Information about the movements in currency exchange rates and the related impact on the translation of the balance sheets of our subsidiaries whose functional currency is not the U.S. dollar for the twelve-month period ended August 31, 2023 is disclosed in “Item 7. Management’s Discussion & Analysis – Other Comprehensive Loss.”

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Each market risk sensitivity analysis presented below is based on hypothetical scenarios used to calibrate potential risk and do not represent our view of future market changes. The effect of a change in a particular assumption is calculated without adjusting any other assumption. In reality, however, a change in one factor could cause a change in another factor, which may magnify or negate other sensitivities.

Interest Rate Risk

We are exposed to changes in interest rates as a result of our short-term borrowings and long-term debt borrowings. We have mitigated a portion of our interest rate risk by managing the mix of fixed and variable rate debt and by entering into interest rate swaps and cross-currency interest rate swaps to hedge interest rate risk. The notional amount, interest payment and maturity dates of the swap match the terms of the associated debt.

The table below provides information about our financial instruments that are sensitive to changes in interest rates. For debt obligations, the table represents the principal cash flows and related weighted-average interest rates by expected maturity dates. For interest rate swaps, including cross-currency interest rate swaps, the table represents the contractual cash flows and weighted-average interest rates by the contractual maturity date, unless otherwise noted. The notional amounts are used to calculate contractual cash flows to be exchanged under the contracts. The weighted-average variable rates are based upon prevailing market interest rates and the outstanding balances as of August 31, 2023.

Annual maturities of long-term debt and derivatives are as follow (in thousands):

Twelve Months Ended August 31, (Amounts in thousands)

Long-Term Debt (Unhedged):

Derivatives:

Interest Rate Swaps:

Cross-Currency Interest Rate Swaps:

Weighted-average pay rate 7.92 % 7.92 % — % — % — % — % 7.92 %

Weighted-average receive rate 7.80 % 7.79 % — % — % — % — % 7.79 %

Long-Term Debt Payments with Fixed Interest or Subject to Financial Derivatives:

(1)The Company has disclosed the future annual maturities of long-term debt, for which it has entered into cross-currency interest rate swaps by using the derivative obligation as of August 31, 2023 to estimate the future commitments. Therefore, the total annual commitments reflects these obligations, including the effect of the cross-currency interest rate swaps on the total-long term debt as disclosed on the consolidated balance sheet.

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(2)The derivative obligations of the interest rate swaps and cross-currency interest rate swaps are included in the Total long-term debt section of this table.

Foreign Currency Risk

We have foreign currency risks related to sales, operating expenses and financing transactions in currencies other than the U.S. dollar. As of August 31, 2023, we had a total of 51 consolidated warehouse clubs operating in 12 foreign countries and one U.S. territory, 40 of which operate under currencies other than the U.S. dollar. Approximately 48.4% of our net merchandise sales are comprised of products we purchased in U.S. dollars that were sold in countries whose currencies were other than the U.S. dollar. Approximately 78.8% of our net merchandise sales are in markets whose functional currency is other than the U.S. dollar. We may enter into additional foreign countries in the future or open additional locations in existing countries, which may increase the percentage of net merchandise sales denominated in foreign currencies.

Currency exchange rate changes either increase or decrease the cost of imported products that we purchase in U.S. dollars and price in local currency. Price changes can impact the demand for those products in the market. Currency exchange rates also affect the reported sales of the consolidated company when local currency-denominated sales are translated to U.S. dollars. In addition, we revalue all U.S. dollar denominated assets and liabilities within those markets that do not use the U.S. dollar as the functional currency. These assets and liabilities include, but are not limited to, excess cash permanently reinvested offshore and the value of items shipped from the U.S. to our foreign markets. The gain or loss associated with this revaluation, net of reserves, is recorded in other income (expense).

Foreign currencies in most of the countries where we operate have historically devalued against the U.S. dollar and are expected to continue to devalue. The following tables summarize by country, for those countries with functional currencies other than the U.S. dollar, the weakening of the countries' currency against the U.S. dollar (devaluation) or the strengthening of their currencies (revaluation):

Country Revaluation/(Devaluation)Twelve Months Ended August 31,

% Change % Change

We seek to manage foreign exchange risk by (1) adjusting prices on goods acquired in U.S. dollars on a periodic basis to maintain our target margins after taking into account changes in exchange rates; (2) obtaining local currency loans from banks within certain markets where it is economical to do so and where management believes the risk of devaluation and the level of U.S. dollar denominated liabilities warrants this action; (3) reducing the time between the acquisition of product in U.S. dollars and the settlement of that purchase in local currency; (4) maintaining a balance between assets held in local currency and in U.S. dollars; and (5) by entering into cross-currency interest rate swaps and forward currency derivatives. We have local-currency-denominated long-term loans in Barbados, Honduras and Guatemala; we have cross-currency interest rate swaps in Colombia; and we have interest rate swaps in the United States. Turbulence in the currency markets can have a significant impact on the value of the foreign currencies within the countries in which we operate. We report the gains or losses associated with the revaluation of these monetary assets and liabilities on our consolidated statements of income under the heading “Other income (expense), net.” Future volatility and uncertainties regarding the currencies in the countries that we operate in could have a material impact on our operations in future periods. However, there is no way to accurately forecast how currencies may trade in the future and, as a result, we cannot accurately project the impact of the change in rates on our future demand for imported products, reported sales, or financial results.

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We are exposed to foreign exchange risks related to U.S. dollar-denominated and other foreign-denominated cash, cash equivalents and restricted cash, to U.S. dollar-denominated intercompany debt balances and to other U.S. dollar-denominated debt/asset balances (excluding U.S. dollar-denominated debt obligations for which we hedge a portion of the currency risk inherent in the interest and principal payments), within entities whose functional currency is not the U.S. dollar. As part of the adoption of the new leasing standard, we recorded several monetary liabilities on the consolidated balance sheet that are exposed to foreign exchange movements. These monetary liabilities arise from leases denominated in a currency that is not the functional currency of the Company’s local subsidiary. The monetary liability for these leases as of August 31, 2023 was $32.5 million. Due to the mix of foreign currency exchange rate fluctuations during fiscal year 2023, the impact to the consolidated statements of income of revaluing this liability was immaterial.

The following table discloses the net effect on other expense, net for U.S. dollar-denominated and other foreign-denominated accounts relative to a hypothetical simultaneous currency revaluation based on balances as of August 31, 2023 (in thousands) including the lease-related monetary liabilities described above:

(1)Amounts are before consideration of income taxes.

Information about the financial impact of foreign currency exchange rate fluctuations for the twelve months ended August 31, 2023 is disclosed in Part II. “Item 7. Management’s Discussion and Analysis – Other Expense, net.”

Examples of where we have significant U.S. dollar net asset positions subjecting us to exchange rate losses if the local currency strengthens against the U.S. dollar are our Trinidad, Costa Rica, and Nicaragua subsidiaries, with balances of $35.7 million, $35.5 million, and $30.3 million, respectively, as of August 31, 2023. Examples where we have significant U.S. dollar net liability positions subjecting us to exchange rate losses if the local currency weakens against the U.S. dollar are our Honduras, Guatemala, and Dominican Republic subsidiaries, with balances of $26.3 million, $24.8 million, and $12.1 million, respectively, as of August 31, 2023.

We are also exposed to foreign exchange risks related to local-currency-denominated cash and cash equivalents, to local-currency-denominated debt obligations, to local-currency-denominated current assets and liabilities and to local-currency-denominated long-term assets and liabilities within entities whose functional currency is not the U.S. dollar. The following table discloses the net effect on other comprehensive loss for these local currency denominated accounts relative to hypothetical simultaneous currency devaluation in all the countries listed in the table above, based on balances as of August 31, 2023:

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In addition, we are exposed to foreign currency exchange rate fluctuations associated with our U.S. dollar-denominated debt obligations that we hedge. We hedge a portion of the currency risk inherent in the interest and principal payments associated with this debt through the use of cross-currency interest rate swaps. The terms of these swap agreements are commensurate with the underlying debt obligations. The aggregate fair value of these swaps was in a net asset position of approximately $2.3 million at August 31, 2023 and approximately $12.9 million at August 31, 2022. A hypothetical 10% increase in the currency exchange rates underlying these swaps from the market rates at August 31, 2023 would have resulted in a further increase in the value of the swaps of approximately $3.3 million. Conversely, a hypothetical 10% decrease in the currency exchange rates underlying these swaps from the market rates at August 31, 2023 would have resulted in a net decrease in the value of the swaps of approximately $4.1 million.

From time to time, we use non-deliverable forward foreign exchange contracts primarily to address exposure to U.S. dollar merchandise inventory expenditures made by our international subsidiaries whose functional currency is other than the U.S. dollar. The net increase or decrease in the fair value of these derivative instruments would be economically offset by the gains or losses on the underlying transactions.

From time to time, we have experienced a lack of availability of U.S. dollars in certain markets (U.S. dollar illiquidity). This impedes our ability to convert local currencies obtained through merchandise sales into U.S. dollars to settle the U.S. dollar liabilities associated with our imported products and to otherwise redeploy these funds in our Company. Since fiscal year 2017, we have experienced this situation in Trinidad and have been unable to source a sufficient level of tradable currencies. We are working with our banks in Trinidad to source tradable currencies. During the third quarter of fiscal year 2023, the Honduran Central Bank began limiting the availability and controlling the allocation of U.S. dollars for the conversion from Honduran lempiras to U.S. dollars.We are actively working with our banking partners and government authorities to address this situation. Refer to “Item 7. Management’s Discussion & Analysis – Factors Affecting Our Business” and “Item 7. Management’s Discussion & Analysis – Liquidity: Financial Position and Cash Flow” for our quantitative analysis and discussion.

Commodity Price Risk

The increasing price of oil and certain commodities could have a negative effect on our operating costs and sales. Higher oil prices can negatively impact the economic growth of the countries in which we operate, thereby reducing the buying power of our Members. Higher oil prices can also increase our operating costs, particularly utilities and merchandise transportation expenses. Inflationary pressures on various commodities also may impact consumer spending. We do not currently seek to hedge commodity price risk.

Item 8. Financial Statements and Supplementary Data

See the list of financial statements filed with this report under Part IV. Item 15 below.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

(a)Evaluation of disclosure controls and procedures.

As of August 31, 2023, under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, the Company carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). These disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by the Company in its periodic reports with the SEC is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that the information is accumulated and communicated to the Company’s management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. The design of any disclosure controls and procedures also is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based upon their evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period covered by this Annual Report on Form 10-K.

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(b)Management’s report on internal control over financial reporting.

Internal control over financial reporting refers to the process designed by, or under the supervision of, the Company’s principal executive officer and principal financial officer, and effected by its board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles, and includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the Company’s assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles and that receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

Management is responsible for establishing and maintaining adequate internal control over the Company’s financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Under the supervision, and with the participation, of the Company’s management, including its principal executive officer and principal financial officer, the Company conducted an evaluation of the effectiveness of its internal control over financial reporting. Management has used the 2013 framework set forth in the report entitled “Internal Control-Integrated Framework” published by the Committee of Sponsoring Organizations of the Treadway Commission to evaluate the effectiveness of its internal control over financial reporting. Based on its evaluation, management has concluded that the Company’s internal control over financial reporting was effective as of August 31, 2023, the end of its most recent fiscal year.

Ernst & Young LLP, the Company's independent registered public accounting firm, has issued an attestation report on the effectiveness of the Company's internal control over financial reporting as of August 31, 2023, as stated in their report which is included herein.

(c)Changes in internal control over financial reporting.

There have been no changes in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) during the fiscal year ended August 31, 2023 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

The certifications required by Section 302 of the Sarbanes-Oxley Act of 2002 are filed as Exhibit 31.1 and 31.2 to this report.

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of PriceSmart, Inc.

Opinion on Internal Control over Financial Reporting

We have audited PriceSmart, Inc.’s internal control over financial reporting as of August 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, PriceSmart, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of August 31, 2023, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of PriceSmart, Inc. as of August 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended August 31, 2023, and the related notes and financial statement schedule listed in the Index at Item 15(a) and our report dated October 30, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

San Diego, California

October 30, 2023

Item 9B. Other Information

None.

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Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

PriceSmart has adopted a code of conduct that applies to its principal executive officer, principal financial officer, principal accounting officer, controller, and to all of its other officers, directors, employees and agents. The code of conduct is available on PriceSmart's web site at https://investors.pricesmart.com/governance/governance-documents. PriceSmart intends to disclose on its website future amendments to, or waivers from, certain provisions of its code of conduct within four business days following the date of such amendment or waiver.

The additional information required by Item 10 is incorporated herein by reference from PriceSmart's definitive Proxy Statement for the Annual Meeting of Stockholders under the headings “Proposal 1: Election of Directors,” “Information Regarding the Board of Directors,” “Executive Officers of the Company” and “General – Section 16(a) Beneficial Ownership Reporting Compliance.”

Item 11. Executive Compensation

The information required by Item 11 is incorporated herein by reference from PriceSmart's definitive Proxy Statement for the Annual Meeting of Stockholders under the heading “Executive and Director Compensation.”

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by Item 12 is incorporated herein by reference from PriceSmart's definitive Proxy Statement for the Annual Meeting of Stockholders under the headings “Securities Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information.”

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by Item 13 is incorporated herein by reference from PriceSmart's definitive Proxy Statement for the Annual Meeting of Stockholders under the headings “Certain Transactions” and “Information Regarding the Board of Directors.”

Item 14. Principal Accounting Fees and Services

Our independent registered public accounting firm is Ernst & Young LLP, San Diego, CA, Auditor Firm ID: 42.

The information required by Item 14 is incorporated herein by reference from PriceSmart's definitive Proxy Statement for the Annual Meeting of Stockholders under the heading “Proposal 3: Ratification of Selection of Independent Registered Public Accounting Firm.”

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PART IV

Item 15. Exhibits and Financial Statement Schedules

(a)Documents filed as part of this report.

(1)Financial Statements:

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

(2)List of financial statement schedules:

Schedule II – Valuation and Qualifying Accounts

Schedules not listed above have been omitted because they are not applicable or the required information is included in the consolidated financial statements or notes thereto.

(3)List of exhibits required by Item 601 of Regulation S-K. See part (b) below.

(b)The following exhibits are filed as a part of this report:

ExhibitNumber Description

3.1(1) Amended and Restated Certificate of Incorporation of the Company.

3.4(9) Second Amended and Restated Bylaws of the Company

3.5(27) Amendment to Second Amended and Restated Bylaws of PriceSmart, Inc.

4.1(6) Specimen of Common Stock certificate.

4.2 (22) Description of Registrant’s Securities.

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10.22(17)*** Form of Indemnification Agreement.

10.32(28) Citibank Credit Agreement dated February 9, 2023.

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21.1* Subsidiaries of the Company.

23.1* Consent of Independent Registered Public Accounting Firm.

97.1* Compensation Recoupment (Clawback) Policy

101.INS Inline XBRL Instance Document.

101.SCH Inline XBRL Taxonomy Extension Schema Document.

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.

* Filed herewith as an exhibit.

** Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Annual Report on Form 10-K.

# These certifications are being furnished solely to accompany this Report pursuant to 18 U.S.C. 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of PriceSmart, Inc. whether made before or after the date hereof, regardless of any general incorporation language in such filing

(1)Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended August 31, 1997 filed with the Commission on November 26, 1997.

(2)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2001 filed with the Commission on April 16, 2001.

(3)Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended August 31, 1999 filed with the Commission on November 29, 1999.

(4)Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended August 31, 2004 filed with the Commission on November 24, 2004.

(5)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 29, 2004 filed with the Commission on April 14, 2004.

(6)Incorporated by reference to the Company’s Registration Statement on Form S-3 filed with the Commission on December 2, 2004.

(7)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q/A for the quarter ended November 30, 2008 filed with the Commission on January 14, 2009.

(8)Incorporated by reference to the Company's Registration Statement on Form S-8 filed April 4, 2013.

(9)Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended August 31, 2014 filed with the

Commission on October 30, 2014.

(10)Incorporated by reference to the Company’s Form 8-K Filed with the Commission on July 17, 2015.

(11)Incorporated by reference to the Company’s Form 8-K filed with the Commission on September 2, 2015.

(12)Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended August 31, 2016 filed with the Commission on October 27, 2016.

(13)Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 2016 filed with the Commission on January 5, 2017.

(14)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2017 filed with the Commission on April 6, 2017.

(15)Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended August 31, 2017 filed with the Commission on October 26, 2017.

(16)Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended August 31, 2018 filed with the Commission on October 25, 2018.

(17)Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended August 31, 2019 filed with the Commission on October 29, 2019.

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(18)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended November 30, 2019 filed with the Commission on January 9, 2020.

(19)Incorporated by reference to the Company’s Form 8-K filed with the Commission on April 7, 2020.

(20)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 29, 2020 filed with the Commission on April 8, 2020.

(21)Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended August 31, 2020 filed with the SEC on October 30, 2020.

(22)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended November 30, 2020 filed with

the Commission on January 7, 2021.

(23)Incorporated by reference to the Company’s Quarterly Report on Form 10-K for the year ended August 31, 2021 filed with the Commission on October 21, 2021.

(24)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended November 30, 2021 filed with

the Commission on January 6, 2022.

(25)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2022 filed with the Commission on April 7, 2022.

(26)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended May 31, 2022 filed with the Commission on July 11, 2022.

(27)Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on December 9, 2022.

(28)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2023 filed with the Commission on April 10, 2023.

(29)Incorporated by reference to the Company’s Current Report on Form 8-K/A filed with the Commission on March 10, 2023.

(30)Incorporated by reference to the Company’s Current Report on Form 8-K/A filed with the Commission on March 24, 2023.

(31)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended May 31, 2023 filed with the Commission on July 10, 2023.

Item 16. Form 10-K Summary

None.

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SCHEDULE II

PRICESMART, INC.

VALUATION AND QUALIFYING ACCOUNTS

(amounts in thousands)

Allowance for doubtful accounts:

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PRICESMART, INC.

Date: October 30, 2023 By: /s/ ROBERT E. PRICE

Robert E. PriceInterim Chief Executive Officer(Principal Executive Officer)

Date: October 30, 2023 By: /s/ MICHAEL L. MCCLEARY

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POWER OF ATTORNEY

Each person whose signature appears below constitutes and appoints Robert E. Price and Michael L. McCleary, and each of them singly, his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agents full power and authority to do and perform each and every act in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or either of them or their or his or her substitute or substitutes may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature Title Date

Robert E. Price

Michael L. McCleary

/s/ DAVID R. SNYDER Vice Chairman and Lead Independent Director October 30, 2023

David R. Snyder

/s/ SHERRY S. BAHRAMBEYGUI Director October 30, 2023

Sherry S. Bahrambeygui

/s/ JEFFREY R. FISHER Director October 30, 2023

Jeffrey R. Fisher

/s/ GORDON H. HANSON Director October 30, 2023

Gordon H. Hanson

/s/ BEATRIZ V. INFANTE Director October 30, 2023

Beatriz V. Infante

/s/ LEON C. JANKS Director October 30, 2023

Leon C. Janks

/s/ PATRICIA MÁRQUEZ Director October 30, 2023

Patricia Márquez

/s/ DAVID N. PRICE Director October 30, 2023

David N. Price

/s/ EDGAR ZURCHER Director October 30, 2023

Edgar Zurcher

/s/ JOHN D. THELAN Director October 30, 2023

John D. Thelan

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Table of Contents

PRICESMART, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) F-2

Consolidated Balance Sheets as of August 31, 2023 and 2022 F-4

Notes to Consolidated Financial Statements F-10

F-1

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of PriceSmart, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of PriceSmart, Inc. (the Company) as of August 31, 2023 and 2022, the related consolidated statements of income, comprehensiveincome, equity and cash flows for each of the three years in the period ended August 31, 2023, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at August 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended August 31, 2023, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of August 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated October 30, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

F-2

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Tax receivables and contingencies

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 1997.

San Diego, California

October 30, 2023

F-3

Table of Contents

PRICESMART, INC.

CONSOLIDATED BALANCE SHEETS

(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

ASSETS

Current Assets:

Investment in unconsolidated affiliates 10,479 10,534

LIABILITIES AND EQUITY

Current Liabilities:

Operating lease liabilities, current portion 7,621 7,491

Long-term income taxes payable, net of current portion 5,045 5,215

Stockholders' Equity:

See accompanying notes.

F-4

Table of Contents

PRICESMART, INC.

CONSOLIDATED STATEMENTS OF INCOME

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

Years Ended August 31,

Revenues:

Operating expenses:

Cost of goods sold:

Selling, general and administrative:

Reserve for AMT settlement 7,179 — —

Separation costs associated with Chief Executive Officer departure 7,747 — —

Asset impairment and closure costs 5,658 — —

Other expense:

Loss of unconsolidated affiliates (55) (10) (58)

Less: net income attributable to noncontrolling interest — (19) (196)